[Ip-health] Check-List for fast tract compulsory licensing
James Love
love@cptech.org
Wed, 26 Sep 2001 16:13:14 -0400
Mickey,
Your concern about the compensation side of 1498 is noted, but
misplaced. The thing to emulate about 1498 is *not* the compensation
system, but rather the basis for *authorizing use* of a patent. Under
1498 any government employee can simply give a private firm a contract,
and the use of the patent is legal. No muss, no fuss, no license, no
negotiation, no finding, no justification, no nothing but a contract.
The contractor's *only* remedy is to seek compensation from the US
government. This is the easiest and best way to handle government use
authorizations ---- without a doubt. And, it is anticipated and
authorized specifically in TRIPS Article 44.2. And this is the system
that should be used in developing countries.
The setting of compensation is a separate issue under the TRIPS, and
should *not* be based upon the 1498 approach. It should typically be
based upon a reasonable royalty based on the generic net sale price,
which is simple and not very costly to administer, a major consideration
in countries that canot spend a fortune on lawyers, experts and
economists to debate this issue. Under the WTO agreement, countries
have a wide range of flexibility in setting compensation, and as noted
by Al Engelberg and in many other places (by Otten, Kantor and others),
the WTO places no restrictions on a country's right to use price
controls or otherwise set the price of intellectual property.
At the risk of bringing up US law again, I note that the US frequently
sets the price for copyrighted material, by statute, in various US
compulsory licensing statutes for copyrights.
Jamie
"Michael H. Davis" wrote:
>
> As you may suspect by now, I think it is quite risky to key any of this to the
> U.S. eminent domain provisions of the patent law (section 1498), primarily
> because the requirement for full compensation, meaning all potential royalties
> and other losses incurred by the patentee, would make such compulsory licenses a
> cure possibly worse than the disease in this area of so-called IP law. It is
> risky because if we depend upon 1498 in any way at all, we will invite that
> response from the pharmaceutical lobby, and they will quite possibly win the
> argument.
>
> I agree wholeheartedly with all the radical details of this checklist, but feel
> it can live on its own without reference to US law, and that it will die if so
> connected. I do not, in fact, think that any compensation at any set level should
> be guaranteed, so perhaps the language of this checklist should set the levels as
> a maximum which in no case should be exceeded, etc.
>
> Of course, given the probability that this proposal will not ultimately succeed,
> I think it would be a far better gamble to attempt to repeal TRIPS entirely.
> Although that is also arguably unlikely, the payoff is far greater. There is no
> reason in the world why any country anywhere should grant pharmaceutical
> patents--or any other kind of patents--if such patents are not in their interest.
> Without the patents, there would be no need for a compulsory license.
>
> Mickey
>
> James Love wrote:
>
> > Check-List for fast tract compulsory licensing
> >
> > With respect to authorizing the non-voluntary use of patents, this note
> > asks the question, what features should be included in any national
> > legislation for a developing country that wants to take advantage of the
> > full flexibility of the WTO TRIPS accord?
> >
> > I have written about this for UNDP
> > (http://www.cptech.org/ip/health/cl/recommendedstatepractice.html), and
> > will not provide a lengthy discussion here, but rather hope to discuss
> > and hopefully reach some consensus on the features that countries should
> > included.
> >
> > Here is a draft check list, which I am confident can be improved.
> > Suggestions are welcome.
> >
> > James Love <love@cptech.org
> >
> > CHECK LIST FOR FAST TRACT COMPULSORY LICENSING
> >
> > 1. In countries where the costs of litigation is an important barrier
> > to the use of compulsory licensing, the system should be upon an
> > administrative process, to the extent permitted under the national legal
> > system. This of course is allowed under Articles 31h, 31j, 31k, and
> > 44.2 of the TRIPS.
> >
> > 2. The government should have at least as strong as rights to authorize
> > use for public purposes as does the US government under 28 USC 1498.
> > That is, government should have the right to use any patent, and to
> > authorize any third party to use any patent, for any government purpose,
> > without a hearing, with a finding, without a license, subject only to
> > the payment of compensation.
> >
> > 3. In no cases of the government authorizing non-voluntary use of a
> > patent should the patent owner have the right to enjoin the government
> > or a private party from acting. This no-injunction policy is permitted
> > under Article 44.2 of the TRIPS.
> >
> > 4. Compensation should be determined by an administrative process, and
> > should be guided by royalty guidelines, which set out recommended
> > royalty rates, based upon net sales of the generic product. The royalty
> > guidelines should be a range of possible royalties. CPT has recommended
> > 0 to 8 percent, depending upon a range of factors (see attachment
> > below). The fact that the government has to choose the rate satisfies
> > the case by case requirement in Article 31.a of the TRIPS.
> >
> > 5. Compensation decisions should be forward looking, including revisions
> > based upon appeals, to lower the risks by third parties using
> > non-voluntary authorizations.
> >
> > 6. The compensation system should permit the consolidation of multiple
> > patents on the same product, in such a way that the generic company pays
> > into a single fund, and the various patent owners have to resolve, at
> > their own expense, who gets what share of the proceeds. Arbitration can
> > settle intra-patent owner disputes.
> >
> > 7. For non-voluntary licenses that are for the commercial market, and
> > require prior negotiation, the procedure should have as a guideline no
> > more than six months to negotiate a voluntary license. This period
> > should not be binding on either party, however, and with good cause, a
> > generic company should be able to proceed with a request before the
> > period.
> >
> > 8. Where the government determines there is an urgent public health
> > crisis and the patents address a public health concern, the government
> > should have the right to waive requirements for prior negotiation for
> > even commercial uses, as is permitted under 31.b.
> >
> > 9. The government should have an Article 31.k administrative
> > proceedure that can be used when the product cannot be efficiently
> > produced for a single market, and exports are needed to achieve
> > economies of scale.
> >
> > ........ This note concerns only those uses authorized by Article 31
> > of the TRIPS. I'll shortly post a separate note on the checklist for
> > Article 30 exceptions to patent rights.
> >
> > ----------------------------------
> > Attachment on Royalty Guidelines
> >
> > `(f) ROYALITY GUIDELINES. In order to provide guidance to patent
> > owners, investors and competitive suppliers of health care inventions,
> > regarding the range of royalties on licenses for patents on medicines
> > that would normally be considered reasonable, and are also consistent
> > with adequate access to medicines, the Minister shall publish royalty
> > guidelines. Such guidelines should include recommendations for
> > compensation as a percent of net sales of products. The initial
> > guidelines, which may be modified by the Minister as needed, are as
> > follows.
> >
> > `(1) two to three percent for a product that does not represent a
> > significant advance in therapeutic benefits,
> >
> > `(2) five percent for an innovative product that provides a significant
> > advance in therapeutic benefits;
> >
> > `(3) for products that are particularly innovative, based upon
> > therapeutic evidence, or for which there was a significantly higher than
> > average investment in R&D, based upon economic evidence, an additional
> > royalty premium or up to three percent.
> >
> > `(4) one percent or less for patents that represent minor contributions
> > to a product, such as a formulation patent,
> >
> > `(5) in cases of multiple patents on the same product, the amounts in
> > (1) through (4) are the combined compensation for all patents, allocated
> > fairly among the various patent owners in accordance with the relative
> > significance and benefits of the inventions.
> >
> > ---------------
> > Attachment on 28 USC 1498
> >
> > US Code as of: 01/05/99
> >
> > Sec. 1498. Patent and copyright cases
> >
> > (a) Whenever an invention described in and covered by a patent of the
> > United States is used or manufactured by or for the United States
> > without license of the owner thereof or lawful right to use or
> > manufacture the same, the owner's remedy shall be by action against the
> > United States in the United States Court of Federal Claims for the
> > recovery of his reasonable and entire compensation for such use and
> > manufacture. . . .
> >
> > For the purposes of this section, the use or manufacture of an invention
> > described in and covered by a patent of the United States by a
> > contractor, a subcontractor, or any person, firm, or corporation for the
> > Government and with the authorization or consent of the Government,
> > shall be construed as use or manufacture for the United States.
> >
> > [snip]
> >
> > --
> > James Love
> > Consumer Project on Technology
> > P.O. Box 19367, Washington, DC 20036
> > http://www.cptech.org, mailto:love@cptech.org
> > voice: 1.202.387.8030 fax 1.202.234.5176 mobile 1.202.361.3040
> > _______________________________________________
> > Ip-health mailing list
> > Ip-health@lists.essential.org
> > http://lists.essential.org/mailman/listinfo/ip-health
>
> --
> You can access my papers on the Social Science Research Network (SSRN) through
> the following url:
> http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=230701
--
James Love
Consumer Project on Technology
P.O. Box 19367, Washington, DC 20036
http://www.cptech.org, mailto:love@cptech.org
voice: 1.202.387.8030 fax 1.202.234.5176 mobile 1.202.361.3040