POOLING OF PATENTS: A GLIMPSE INTO THE FUTURE OF BIOTECHNOLOGY
Updated: Sep 4, 2020
Under international human rights law and the International Health Regulation, countries have an obligation to share technical and financial resources and information. Our experience through past efforts in developing the influenza vaccine and in dealing with the HIV/AIDS pandemic has shown us that the current IP framework for biotechnological patents that deal with public health at large is inadequate to provide real access to people. An alternate method wherein patents could potentially be more easily accessed by a larger portion of the population for more equitable rates is patent pooling. A patent pool is often described as a system wherein there is an agreement between the owners of several patents to pool their patents such that they cross-license the patents amongst themselves as well as license (either in the form of the whole bundle or individually) to a third-party. In the course of this article, the author will first introduce the issue of patent thickets and fragmented IP law, and then propose patent pools as a potential solution to this. In context of developing a vaccine for COVID-19, these patent pools would increase access and promote development.
Patent “Thickets” and Fragmented IP
Today’s IP framework bears the “tragedy of the anticommons” – a term coined by Michael A. Heller and Rebecca S. Eisenberg to describe a situation where, due to transaction costs, multiple people have the right to exclude others from the use of a scarce resource such that no one can use the resources most efficiently. This leads to the development of a patent “thicket”, a situation commonly found in areas that require cumulative investigation for the development of new technology such as biotechnology.
In a patent thicket, a company finds that it must hack through an existing and overlapping web of patent rights awarded to multiple licensors in order to commercialize a new product. Shapiro compares this to building a pyramid in order to add a new block and increase the height of the pyramid, the new innovator must obtain the permission of every person who has placed a block on the pyramid prior to them. Another problem that arises in this context of fragmented IP ownership is that multiple companies and universities find different parts of the puzzle but each one individually holds the patent to that part in a way that makes further development difficult.
The potential new innovator is disincentivised by two things: first, the fact that several patents must be navigated through to produce a single product means that the innovator must find out who owns what license. In areas such as pharmaceutical patents and biotechnology where research is wild-spread and rapid, this is a complex task whose failure could result in lengthy litigation and hefty legal costs. Second, acquiring licenses for each of these “stacked” patents increases transaction costs and makes it more difficult for a creator to adequately get reimbursed for the money spent on R&D. This increases financial risk that is only heightened by the lack of knowledge as to whether such a patent already exists in the market. Patent pools help minimise such risks by distributing it amongst members of the pools (thereby reducing burden on the individual innovator) and by promoting cross-licensing that gives innovators access to required patents at reduced licensing costs.
Patent Pools in Biotechnology
One of the main problems when it comes to research and access to medical patents is accessibility for developing or underdeveloped countries. This problem is not solved by compulsory licensing, which is currently the only measure under IP law for increase of accessibility, albeit even by force. Although it is allowed by TRIPS, political pressure from developed countries, which also mostly happen to be the countries that have the capital to conduct R&D for such patents, makes implementing compulsory license difficult. Since compulsory licensing would have to be done on a country-to-country basis, this could also take longer period of time and give rise to asymmetry in the acquisition of life-saving drugs in different countries, furthering inequalities. This could be why an estimated one-third of disease-related deaths worldwide is due to people not getting access to medical treatments that already exist. This is particularly highlighted in the HIV/AIDS pandemic, with only one-fourth of most critically ill people living in developing countries with the disease receiving treatment in 2008.
Moreover, the purpose of patent law is to incentivize developers and researchers to invest the large sums of money into research in exchange for royalties. Compulsory licensing will compromise this delicate interplay of patents and innovation in the long run and could undermine the patent system. What is required is a market-driven solution to resolve problems relating to the access of necessary patents, such as an established patent pool. There has been widespread agreement across scholars that when it comes to pharmaceutical patents and the worldwide development of vaccines and drugs to common ailments, the current system of patent protection dampens access and causes more problems than it solves.
Patent pools have been advocated as alternatives here. Because of their structure that has the potential to be institutionalized, patent pools serve as efficient systems of collective management of patents. One could take the key principles of open science – collaboration and communication between different groups around the world that voluntarily enter into such an agreement to share their knowledge and inventions – and transform it into a formalized patent pool. The formation of a patent pool that would then be licensed out would enable wide access to development of vaccines. This also sends out a powerful message to vaccine manufacturers that the IP environment is conducive to innovation by minimizing the royalties the licensees normally would have had to pay.
Advantages of Patent Pools
The US Department of Justice and Federal Trade Commission recognizes the benefits of patent pools as they clear blocking patents, reduce transaction costs, reduce patent infringement litigation and increases know-how and access to technology across the world through a voluntary yet formal system. Corporations that hold the patents to an industry’s basic building blocks can be “blocking”, i.e., they can prevent each other as well as other companies from bringing about new technology in the field. By creating a patent pool of these basic patents, businesses can share the basic building blocks and build their business, which in this case would also result in the production of the vaccine, without being barred by previous patents. Such a pool would provide even a third-party licensee a one-stop shop to get the bundle of licenses required, hence eliminating the accessibility block caused the patent thicket.
This also reduces transaction costs in two ways – first, it reduces the search cost. This benefits both the licensee and the licensor. For the licensee, a pool eliminates the need to search in a particular technology area and risk not finding the right patent and getting sued as a result; for the licensor, their patent is more easily discoverable to those who wish to utilize it. A single innovator must often negotiate with multiple patent holders for a single invention, leading to a loss of time and money. In the presence of a patent pool, the innovator merely needs to negotiate with a single entity – the pool, thus reducing transaction costs.
Next, patent pools distribute risks regarding R&D among its members. Royalties, as well as liabilities, are split between the members of the pool in a pre-determined ratio. Patent pools also colossally increase access to technologies and create an institutionalized exchange of technical information among its members and licensees.
When the SARS coronavirus breakout occurred, overlapping IP rights led to a “dead-end” situation when several independent institutions sequenced the SARS genome independently and found themselves unable to proceed due to the patent thicket formed. To overcome these concerns, the patentees formed a patent pool. This pool never saw the light of day because by the time it was formed, WHO had already controlled the health emergency caused by SARS. However, this is a chance to inspect the possibility of a patent pool in such a scenario, which is very much like where we are today with COVID-19. UNITAID is a similar, more long-term patent pool for the production of affordable HIV/AIDS medicines and ARV treatment. It is completely voluntary, and companies that wish to produce medicines or technology related to it may seek a license from the pool against a royalty and produce it in developing countries.
Technology builds on previous research to bring about new breakthroughs and biotechnology is no exception. Other areas of manufacturing technology too have benefited greatly from instituting patent pools. The R&D of a vaccine for COVID-19 is at its nascent stage but it will require to use the genome sequencing done on the SARS virus in order to effectively make a vaccine at the earliest. This could be a problem if a new innovator has to trace down every past researcher that has worked on SARS or other similar influenza virus strains in the past and obtain licenses from every one of them. In such a delicate case where time is of the essence, this would be a waste of time and public money. This would also impede researchers, all containing a part of the know-how of developing this vaccine, from coming together and working together to invent it at the earliest.
Title Image Source: Medicines Law and Policy
The article has been written by Tanya Antony who is a law student at the West Bengal National University of Juridical Sciences (NUJS). A science enthusiast, she takes a keen interest in technology and IP law and can have as passionate a conversation about the latest policy decisions as she can about the mysteries of ever-expanding space.