Are Patent Pools an Effective Solution to COVID-19’s IP Barriers?

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The COVID-19 pandemic has in many ways shown the benefits of collaborative research. Data is being released freely almost every day on preprint servers, which is proving to be crucial for understanding the biology of the virus and in the search for possible drugs and vaccinations. Research and discovery of genome structures too, which has traditionally been limited to private institutions is now being publicly shared on platforms such as GISAID to help researchers and scientists work with open access resources. One of the main proposals for promoting this type of unprecedented collaborative research is the endorsement of voluntary intellectual property pools, particularly patent pools for pharmaceutical drugs. The World Health Organization (WHO) and the European Union are strongly backing the same whereas the US and the UK have pushed against a resolution for the same in the 73rd World Health Assembly held virtually on 18-19 May 2020. The Medicines Patent Pool (MPP), an UN-backed public health organization that works for increasing access to life-saving drugs in low and middle-income countries, has been instrumental in pushing for the establishment of this pool and has also expanded its mandate to cover COVID-19 related health technologies. The idea of a patent pool may be particularly useful for a generic drug manufacturing major like India. The pool can help combine expertise and know-how to help with faster production of drugs found to be effective for the pandemic.

What is a Patent Pool and How Does it Work?

While patent pools themselves are not a new instrument for sharing patents and allowing easy licensing procedures, the proposal for a global patent pool is quite unprecedented. The biggest of pools, Mega Pools, have been at industry-wide levels which now seems minuscule in front of the proposed global level patent pool. Recently, patent pools have come to be considered for industry-wide Standard-Essential Patents (SEPs) licensing too. Especially with the EU seeing an increasing amount of litigation concerning SEPs, it is beginning to identify SEPs patent pools as a solution that will help create a predictable framework for standard-setting and promoting transparency. The success of such patent pools and their licensing terms will in turn determine the success of the SEPs.

A patent pool is an agreement between parties who are patent holders to license their patented products to each other or to other defined third parties. Patent pools have mostly been used by industry players when they need to share complex and mature technologies that require the use of patents held by other parties and cannot be successfully worked without infringing them. Instead of going through an arduous route of seeking permissions and licensing at each level and for each patent, a patent pool allows the use of the pool’s products readily once the initial terms of licensing are accepted by the parties. A patent pool is an aggregation of patent rights that is made available collectively to the members of the pool based on a payment of fees or in proportion to their contribution to the pool etc., with the instrument allowing many customizing options to the parties.

Patent pools have an effect on innovative and competitive behavior. The pandemic has brought out the need for collaborative research and the outlining of recognized outcomes with respect to patent pools is useful here. There are several benefits to the creation of patent pools. Amongst the benefits are efficiency and the reduction in transaction costs. Through the creation of patent pools and the subsequent sharing of available information, the production of goods speeds up. It allows for the development of technologies with the use of existing information and increases the chances of innovation than in instances of having to build a product from scratch. Further, instances where patents are complementary to each other, that is, when a particular technology can be built using existing patented products and the patent holders happen to be different parties, the existence of a patent pool helps in sharing not just use of the patented product but also the know-how that goes with it, thereby helping and speeding up innovation.

Connected to this point is the reduction of transaction costs through patent pools. By facilitating usage of patented technologies readily, patent pools help overcome administrative hurdles by allowing licensing through membership to the pool instead of interested parties having to go through the process of seeking permissions, licensing,  distributing royalties, etc., for the use of the technology. Over here, SEPs via patent pool licensing would prove to be particularly helpful for both SEP holders and SEPs licensees in reducing transaction costs. Also, the adoption of FRAND (fair, reasonable, and non-discriminatory) compliant licensing practices that benefit SEP owners would amplify the possible success of patent pools.

While on the one hand patent pools help in innovation, on the other they raise concerns of anti-competitive behavior. Often the creation of patent pools has led to questions on how it actually aids the fostering of innovation when it has the effect of moderating competition by allowing the use of competing products within the pool. Particularly, this problem is amplified when there is a search for alternative or substitute products. Given this issue, competition regulators are generally of the view that patent pools should ideally consist of complementary patents (patents that work together) rather than substitute patents as this reduces the incentive to innovate when there is already a similar product available in the pool. Another problem within a patent pool is that of the possibility of collusion amongst the pool members with respect to aspects beyond the agreed sharing of patents such as sharing of information on pricing and market strategies etc., which is more harmful to the market and consumers than otherwise.

The Proposed Voluntary Patent Pool

Initially, the Costa Rican government had suggested the creation of a pool of right to tests, medicines, and vaccines for the coronavirus pandemic to be freely available or be available at minimal and affordable licensing terms to ensure that countries with low economic resources are not left to fend for themselves. Last month, the European Union proposed the use of a voluntary patent pool to the World Health Assembly, which is WHO’s decision-making body, and WHO’s Director-General, Tedros Ghebreyesus endorsed the same. The proposed pool aims to collect patent rights, regulatory test data, and any other information and intellectual property that will help in the development of vaccines and drugs and improve diagnostic abilities.

The voluntary pool is an alternative to the compulsory licensing and voluntary licensing options that is being mooted by governments and advocacy groups. In that, what it aims to do is accelerate scientific discovery and ensure the broad sharing of the benefits that create access rather than only focus on the production of the patented products deemed to be necessary. The sharing of all relevant data and technologies related to COVID-19 in the pool could lead to the creation of a global public good that is much desperately needed for dealing with the pandemic. The focus of such a pool is not only scientific advancement but more importantly to make sure that the outcomes of such advancement is made available across the globe, particularly to countries that would not be able to afford the same otherwise. While many countries like Israel, Canada, and Chile have already taken measures to speed up licensing processes and have tweaked their patent regime to dilute the rights of patent holders, the voluntary pool can be used either as an alternative or as a complementary mechanism to these regimes. Further, with pharma companies allowing voluntary licensing for their COVID-19 products, the use of the voluntary pool may prove to be very useful for collaboration and research.

While there are obvious benefits to the creation of this voluntary pool, concerns have been expressed as to how a voluntary pool can possibly incentivize firms and pharma companies to share their IP. Further, while patent pools were proposed even during the public health crises of the SARS outbreak in 2002 and the H1N1 pandemic in 2009, they were not formed, therefore leaving this open to doubts over its success during public health emergencies. Also, given that patent pools are not common in the pharma sector, it further adds to doubts over its success. Given the high costs of production involved in the pharma sector, a long incubation period in the form of clinical trials and regulatory barriers alongside the search for market exclusivity for products, the possibility of collaboration has been very minimal. Apart from this, the creation of a voluntary patent pool cuts into the power of countries to exercise compulsory licensing as a mechanism to ensure the availability of life-saving drugs. The proposal being for a voluntary pool, a patentee can simply choose not to participate in the same. Considering that COVID-19 presents a goldmine to pharma companies, it remains to be seen how many will voluntarily share their patented products in the pool. For a comparable situation, the response of pharma companies to the AIDS crisis in developing countries is perhaps indicative.

However, there seems to be enough pressure from the public and media on private entities, particularly pharma companies, that seeks to push them into sharing their products and patents in more open manners and to add to the efforts of tackling the virus, alongside emergency measures taken up by governments to overcome patent barriers. So, if not the carrot, the stick certainly seems to be working in favour of more collaborative research rather than privatized research methods; and having a voluntary pool for sharing IP can possibly push collective efforts in the right direction.

Please click here to view our other posts related to COVID-19 and here to view other IP developments related to it.

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