Obama admin actively opposes Nexavar compulsory license

While I shouldn’t be surprised at the arrogant nature in which the US treats the Indian IP regime, I was still slightly shocked at how superiorly the US behaved over India in this particular exchange between the USPTO and Congress. Teresa Stanek Rae, the Deputy Director of the USPTO testifies before Rep. Bob Goodlatte, in the House Subcommittee on Intellectual Property that the USPTO continues to actively try to ‘educate’ and persuade Indian officials to not grant any further compulsory licenses. (Rep. Goodlatte, it turns out, is an original sponsor and coauthor of the infamous SOPA and has also written defining parts of CISPA. This has both the ironic as well as expected result of him believing that others should be more ‘educated’ in IP matters).  I’ve tried to reproduce the testimony by paraphrasing or quoting, with my comments in brackets alongside.  (Warning: Long post! Though large parts of it are just reproducing parts of the video) 
Goodlatte begins the questioning by giving a background of how in the recent years Brazil, Thailand and India are ‘threatening’ companies with the use of compulsory licenses, as a negotiating strategy to control prices. Then, mentioning the recent unprecedented Nexavar compulsory license against Bayer, he focused on the reason for the grant of the Indian compulsory license as Nexavar not being sufficiently worked in India because it was not locally manufactured. 
He asks what steps the administration took and what they should now be doing to ‘ensure that countries think twice about using compulsory licenses simply as a negotiating strategy or to facilitate their budget planning’. 


  1. It appears Goodlatte has not read the order as it very clearly and logically lays out its reasoning for the compulsory license. (A) Reasonable requirements of the public were not being met, (B) the drug was not ‘reasonably affordable’ to the public, and (C) was not ‘manufactured to a reasonable extent in India’. As Shamnad mentioned in his post on the order, this third reason would probably be the most controversial, and expectedly, Goodlatte has only focused on this, ignoring the other two. To be clear: More than fussing about whether it was manufactured in India or not, it was vitally important in this case that the drug was neither affordable nor accessible by a majority of the patients who needed it.
  2. Goodlatte also refers to compulsory licenses as though they are evil. I wonder if he was around when the US govt was ‘threatening’ Bayer back in 2001 with a compulsory license on Anthrax pills, before Bayer agreed to US’ demands to supply 100 million pills at $0.95 instead of $1.75 when it had affected a few dozen people. For comparison’s sake, the treatment of Nexavar costs Rs. 280000 / month (~ $5100) and a little less than 9000 people were prescribed the drug per year. After the license, it will cost Rs 8800  (~ $160). ]
Rae: After an introduction of her own past history with the pharmaceutical industry, she responds by saying that compulsory licenses dissuade pharma and biotech from innovating or bringing their products into such countries.
She calls the reasons for the compulsory license in India “dismaying” as they were for reason that she thinks did not meet international standards and not due to a national crisis.
She explains to Goodlatte that the USPTO has people on the ground who are engaging with all the offices in India to discuss the importance of not granting compulsory licenses where it is not warranted. She goes on to say that unfortunately ‘educational’ efforts not yet been successful. The compulsory license was granted by Kurian on the last day he was at the Indian Patent Office as commissioner. 
They are also working with continuing discussions with regulatory authorities, outside of the Indian Patent office context and doing everything they can to respect rights of US innovators.
She points out that sadly, the losers are the Indian people because pharma will delay bringing pharmaceuticals into India now. 


  1. Regarding the effects that compulsory licenses have on innovation, it turns out there is very little evidence to support this. In fact, Colleen Chien has written a good paper on how compulsory licenses have little to no negative impact on innovation.
  2. The rest of her speech here all comes across as very patronizing. I offer my sympathies to her for her dismay at the ‘lack of international standard’ of the order.  And would like to also thank her for her for the USPTO’s ‘educational efforts’ and hope they continue to be as unsuccessful. I also don’t quite understand the significance of mentioning Kurian’s last day here. 
  3. While they are discussing the compulsory license in India and talking about respecting the rights of US innovators, I’d also ask them to respect India’s IP regime, the TRIPS flexibilities and rights of Indian consumers. ]
Goodlatte: I appreciate that concern, but the problem is that countries that treat pharma fairly and countries which issue CL or threaten to do so, or mandate price controls are an untenable combination because countries will reverse engineer and then sell the drug. How do we stop that? 
Rae: Reverse engineering of complicated drugs takes too long. India needs to gear up if they want to do it fast enough as it is very sophisticated. 
[Swaraj: ….. ] 
Goodlatte: But they’ve done it in this instance.
Rae: Perhaps they started earlier than I anticipated. 
Perhaps teeming with them on the ground along with more education and IP awareness is the best weapon that we have because in the long term, India wants to be a ‘good’ player in the international community. So we are focusing on more education and efforts up front to stop this in the future. 


  1. I don’t know if it’s through ignorance or veiled threats, but again, Rae comes across as being very patronising of India – stating that India wants to be a ‘good’ player in the international community – and thus would be willing to listen to America’s efforts to ‘educate’ them. If this is a veiled threat, then of course, the message is that India will be seen as a ‘good’ player internationally only if they listen to the USPTO.]
Goodlatte: These efforts seem to be driven by govts to benefit their domestic industries. They’ve been getting a free pass to devalue patented innovations of American companies. If there was one immediate step to help this global situation, what would it be?


  1. Talking about foreign governments trying to help their domestic industries…. As opposed to America’s efforts to unabashedly support their (local) big pharma without considering public health concerns?]

Rae: Getting more on track with procedural and substantive patent harmonization.
Goodlatte: Making the compulsory licensing issue a part of International IP negotiations would be a critical part of that.
I understand why CLs may be needed. CLs are for when life saving drugs are not being sold in a country. However, if it makes it unattractive to sell in a country locally, by forcing them to manufacture locally or mandating price controls, making it unfair to US consumers who then have to subsidize it. So this should be front and center – a priority issue.. has been an issue for quite a while now and should be injected into that process very aggresively.


  1. This moves the conversation into dangerous territory. Patent harmonization, especially substantive harmonization is a very very complicated and risky scenario – seeing as no country seems to have figured out an optimal patent regime for even themselves. Throw in issues of local contextualisation and region specific domestic industries and we have ourselves a nice big mess.
  2. Allowing compulsory licenses to be used as bargaining chips against the countries that need it, to further push a TRIPS plus IP regime which has no real basis in the first place is extremely dangerous for all countries involved, yet this is exactly what he is suggesting.
  3. Also, he does not seem to fully understand why compulsory licenses exist, as shown when he makes it seem like they only make sense when a drug is not available at all in a country.]
Rae: I have personally have engaged with various agencies of the Indian govt on this issue, and it continues to be part of ongoing efforts of USPTO’s external affiairs division – so this is front and center- and we are consistent in trying to stop those efforts and stop the granting of further CLs.
Goodlatte: Can a WTO dispute be brought?
Rae: based on my limited knowledge, this should be considered in our tool kit.
  1. This is probably in reference to the third reason for the compulsory license, that is the local manufacturing clause. For this, I reference another of Shamnad’s previous posts on this issue: “For one, Article 31 of TRIPS does not stipulate any “grounds” for invoking compulsory licenses—thereby suggesting that almost any ground would pass muster. Some argue that a local working provision contravenes the mandate under Article 27 to not “discriminate” between locally produced and imported patented products. Given the fact that in the WTO Canada case, the panel stated that discrimination meant “unjustified differentiation”, one could argue that “local working” is a “justified” differentiation. For one, the Paris Convention clearly stated that “importation” would not amount to working of a patent, and that if a patent wasn’t worked, this could be treated as an “abuse”. Secondly, TRIPS is premised on the promise of technology transfer to developing countries. And a local working provision is geared towards encouraging such technology transfer. By forcing patentees to “work” their patents in India, the regime encourages local use/transfer of the said technology.”
  2. Aside from this, according to KEIonline, “U.S. has also kept and added provisions to its own domestic laws that require patented inventions developed with federal research subsidies to be manfactured in the United States. A U.S. court even recently granted a compulsory license on a patent on a heart disease device, in order to prevent the manufacture of an infringing device from relocating manufacturing process in Mexico.”

    Unclean hands, perhaps?]

H/T to Jamie Love,

Edit: Rae has now retracted and ‘clarified’ parts of her statement. As per the USPTO’s director’s blog where the clarification was made:
I was also asked some questions during my testimony and want to take this opportunity to clarify my responses relative to data protection for biologics and compulsory licensing under TRIPS and wanted to take this opportunity to clarify my responses. Although compulsory licensing can be permissible under the TRIPS Agreement, we encourage our trading partners to consider ways to address their public health challenges while maintaining intellectual property rights systems that promote investment, research, and innovation. The broad interpretation of Indian law in a recent decision by the Controller General of Patents of India regarding compulsory licensing of patents, in my view, may undermine those goals.” 


  1. Swaroopa Chavan

    Their study (if at all?) of facts, background and circumstances in India seems to be raw and naive. TRIPS also contains provisions that allow a degree of flexibility and sufficient room for the nations to implement their own patent laws, IP system and developmental needs.India’s decision of CL is absolutely in compliance with this flexible rule. In fact, after this CL, a positive change is observed. Pharma manufacturers have started changing their policies. Roche partnered with Emcure and reduced the cost of Herceptin and Mabthera.

  2. Anonymous

    Ms. Teresa Stanek Rae has now come with a partial ‘retraction’.

    While she earlier mentioned (as per the Youtube video), she had earlier stated that “I think, did not meet international standards”
    she has now turned around and retracted part of her statements.

    However, she has still NOT mentioned exactly which international standard was not met by India.

    Freq. Anon.

  3. patent litigation

    The U.S. government is owned and controlled by large corporations and similar special interests whose profit margins and other priorities could conceivably be dented by the existence of compulsory patent licenses and similar initiatives that benefit the general public. For this reason, U.S. legislative and executive branch statements and agendas should largely be ignored.


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