Patent Pools: An Attempt to Reinforce the Status Quo and Private Ordering

The experience of the HIV/AIDS epidemic wherein patents hindered access to affordable medicines raises serious concerns about the accessibility and affordability of present and future medical products such as medicines, vaccines, and other products required for the prevention and treatment of COVID-19. Scholars and experts are proposing various methods to overcome the intellectual property (IP) barriers especially patent barriers. These suggestions can be classified into two broad categories viz voluntary licensing (VL) and compulsory licensing (CL).

VL most often takes place in the form of bilateral license or patent pledging or patent pooling. “Patent pledging” refers to the unilateral licensing of the patent through a published licensing agreement.  There is no need for formal signing of the licensing agreements. Such licenses normally contain minimum conditions for use. An example is the Open COVID  Pledge in which  many Big Tech companies are already participating.

A patent pool is another idea in circulation to address the IP barriers where the patent holder licenses the patent to the pool which in turn sublicenses the patent to potential manufacturers. In 2010 the Medicine Patent Pool (MPP) was established to facilitate the voluntary licensing of patents related to HIV/AIDS, Malaria, and TB. Of late the mandate of MPP was expanded to include Hepatitis C. The President of Costa Rica approached the World Health Organisation (WHO) to establish a technological pool to facilitate access through technological transfer. There is also a suggestion to create a pandemic patent pool.

In the latest development, the Resolution of World Health Assembly (WHA) “Covid-19 Response”  has suggested voluntary pooling and licensing of patents.  In another development, Gilead Sciences Inc has signed non-exclusive voluntary licensing agreements with five generic pharmaceutical manufacturers. Similarly, in an attempt to pre-empt the issuance of compulsory licenses Gilead Sciences issued VL to 3 Indian companies for Remdesivir and established private ordering on generic production. Under the VL only the named licensees can supply the drug to 127 identified countries.

The supporters of voluntary measures, especially patent pools, cite the following advantages. First, VL through patent pools provides hassle-free procurement of license(s) for aggregation and dissemination of innovative products for COVID-19 treatments.  It also facilitates freedom of operation in many countries since VL uses a single license and thus has the potential to facilitate access in many countries. CL by contrast is territorial and therefore must be secured in individual countries to ensure access. Further, many supporters of the pool, without citing any evidence, view the use of CL as an attack on the innovation system.

However, the most important limitation of the patent pool is that it is purely a voluntary mechanism. Hence, it remains unsure whether the owners of the required patents would agree to be a part of the pool.  Thus, access to IP protected medical products at an affordable price would depend on the generosity of the IP holders. In contrast, under a CL, governments take action to allow the third parties to make use of the patents.

Further, in the case of pharmaceutical patents, the patent owner has a tendency to create a fence around the molecule through multiple patents to prevent generic competition. In reality, the generic manufacturer needs the freedom of operation on only one specific patent but there are numerous patents packaged together available for licensing through the pool.  Patent laws of many countries including India prohibit the patenting of known molecules, thereby preventing the issuance of multiple patents on a single molecule. However, the patent pool VLs could be used as a mechanism for rent-seeking through the packaging of multiple patents on the same molecule even if such patents are not enforceable in the country where the VL is being used.

The experiences of MPP licenses shows that at least three VL licenses to Indian companies were given for which there was no patent protection for that product in India. Thus, the Indian companies were required to adhere to the conditions under the VL even in the absence of their application to India. CSO groups also criticized VL licenses for restricting countries to manufacturing only rights or limiting rights to other countries’ patents thus preventing or creating difficulties in the possibility of supplying those markets effectively.

The idea of a patent pool is feasible when there is mutual benefit or bargaining power among the patent holders. For example, in the case of smartphones involving groups of patents which are essential for developing the final product. the owner of a single patent among the group can alone block the production altogether. This encourages pooling.   Similarly, such as in the example of the DVD patent pool, where the interest of all the parties – members of the DVD patent pool and the patent holders i.e Motion Pictures Association, is mutual effective, in this case to control piracy and permit the hardware manufacturer to manufacture a DVD compatible video player, patent pooling is encouraged. However, in the area of healthcare, there is no such equivalent bargaining power between the originator and generic companies.  To the contrary, the originator can produce and sell the patented medicine without the help of generic companies. In that case, other factors may create interests for the patent holder to issue VL bilaterally or through a pool. The originator may choose a pool to control generic competition by avoiding bilateral negotiations with generic companies, entrusting that task to the pool.  Furthermore, as a marketing strategy, participating in such pool may be used to create good publicity for the participants even as it limits generic competition.

VLs can also give greater control over patent molecules in comparison to CL. Under a VL, the patent holder can pre-empt the competition by imposing various restrictive conditions such as sourcing raw materials from only authorized actors, the prohibition of the supply of products to certain countries, etc. Whereas, such control is not possible under a CL which potentially creates maximum competition in the market.  Thus, VLs, including patent pools, bear the risk of private ordering to maintain monopoly and profits.

Though voluntary action even in the health care industry offers a certain degree of benefits, it is not a substitute for the actions of the government especially in emergency situations like the present pandemic as the conditions of VL do not facilitate affordability, competition or development goals such as local production. It is important to note that the Governments are under a national and international legal obligation to ensure the conditions for the enjoyment of the right to health. This obligation makes governments seriously consider the use of TRIPS flexibilities such as CL instead of waiting for the voluntary measures of the patent holder.

The supporters of the VL often ignore the limitations of VL mechanisms especially in a pandemic crisis and end up reinforcing the status quo and legitimizing private ordering.  Although VL has a place in combatting COVID 19, it should only be used when it improves access, not when it reinforces existing private ordering challenges.

About the Author

  • IP Researcher and Scholarship Awardee from Texas A&M University School of Law for Fall 2020, India.