On March 8, 2018, USTR and the interagency committee on the Special 301 held a hearing. KEI was one of the groups testifying. More on this process here: https://keionline.org/ustr/special301
I began our oral testimony discussing President Trump’s promise, during the election, to negotiate lower prices on drugs for Medicare, noting that many of the comments by PhRMA and other drug company lobby groups would create norms that would make it impossible for President Trump to deliver on even a small fraction of his promised savings.
I then read the following comments about compulsory licensing.
(more on compulsory licensing here: https://keionline.org.cl)
Compulsory licensing
PhRMA and other groups lobbying on behalf of big drug companies frequently target the use of compulsory licensing as a “harmful IP-related trade barrier”.
KEI sees compulsory licenses as an important and underutilized tool to address excessive pricing and restrictive licensing practices.
I would like to take a minute to provide some context for this proceeding.
First, the United States has at least 15 separate statutes that are used to permit non-voluntary use of patents, not counting our various exceptions to patent rights for research or uses by medical professionals.
Second, the United States is by far, and I mean by far, the most frequent user of compulsory licenses. USTR itself overturned an injunction on the importation of iPhones and iPads that infringed on patents owned by Samsung, on August 3, 2013.[1]
Under the Supreme Court eBay Doctrine regarding the enforcement on injunctions, courts routinely permit infringement of patents, when royalties are paid to the patent holder. For another example involving Apple: in 2017, Apple successfully asked a judge for permission to use, without a voluntary license but subject to an ongoing royalty, U.S. Patent No. 5,781,752, titled “Table based data speculation circuit for parallel processing computer.[2]
The compulsory licenses under the eBay doctrine are fairly common, about one a month for a while, but now less frequent as parties tend to grant voluntary licenses, when it is perceived to be hard to enforce an injunction, and they cover a wide range of technologies.
In the area of medical technologies, the most common compulsory licenses ordered by the courts are for medical devices and diagnostics, of which there are many, on everything from contact lenses to artificial heart valves to diagnostic technologies. Often the companies requesting such compulsory license are innovators themselves.
For example, in 2008, Abbott used the eBay doctrine to obtain a license to HCV Genotyping testing patents. Similar compulsory licensing efforts were successful in several high income countries, including Germany, where Roche was requesting the compulsory license, and in Australia and the UK, to mention a few other countries.
The United States has also used the threat of compulsory licensing to force more liberal licensing or price discounts, in cases where the federal government was a funder of research, including the patents on reverse genetics needed to manufacture vaccines for the Avian flu, the stem cell patents held by WARF, the Abbott patents on ritonavir, and the Fabry patents now held by Sanofi, to mention a few cases under the Bayh-Dole Act. In 2016, 51 members of Congress asked the federal government to make more frequent use of this Act.[3]
Recently 18 members of Congress asked the federal government to use 28 USC 1498 to grant compulsory licenses on patents on HCV drugs, and the Senate Armed Services Committee in 2017 adopted a directive to the Department of Defense to use compulsory licenses when prices on Army-funded drugs like Xtandi are more expensive in the United States than in other high income countries.
Many persons, including President Trump, have called for changes in the law to allow Medicare to negotiate drug prices. If Medicare negotiates drug prices, it will involve a threat, by the United States, to withhold reimbursement, narrow formularies or increase co-payments. All of these measures hurt patients. We want the Congress to give the government more robust authority to use compulsory licensing, in order to protect patients, effectively putting the monopoly at risk rather than the patient, when there are disputes over prices.
KEI and others are planning to asking the Trump administration to use, under existing statutes, either or both 35 USC 203 and/or 28 USC 1498, to end monopolies, on at least three drugs, this calendar year. In every case there are very significant abuses of patent rights, and negative consequences for patients.
Finally, we want to call attention to the growing patent thickets for two new important technologies, CRISPR and CAR T. If we don’t have to ability to use compulsory licenses to force more liberal licensing of technologies, it will harm innovation and make us defenseless from abusive pricing.
[1] Michael Froman’s decision in the Apple/Samsung ITC patent dispute and the USTR trade agenda, August 6, 2013, https://www.keionline.org/22282.
[2] Wisconsin Alumni Research Foundation v. Apple, Inc., Case: 3:14-cv-00062-wmc, (W.D. Wis., June 6, 2017).
[3] 2016: 51 members of Congress have asked the NIH to use March-In rights to rein in high drug prices, January 11, 2016. https://www.keionline.org/22983
Annex. US statutes that are used for compulsory licensing (non-voluntary use) of patents.
35 U.S.C. 203 – MARCH-IN RIGHTS (Bayh-Dole Act)
35 U.S.C. 271(e)(6)(B) – INFRINGEMENT OF PATENT (biologic products where patents are not timely disclosed)
35 U.S.C. 283 – INJUNCTION (under eBay doctrine)
28 USC 1498 – Patent and copyright cases (use by or for government)
30 U.S.C. 937 – CONTRACTS AND GRANTS (Black Lung disease)
42 USC Sec 2183 – Nonmilitary utilization (patents on atomic energy)
42 U.S.C. 7608 – MANDATORY LICENSING (Clean Air Act)
42 U.S.C. 16192 – NEXT GENERATION LIGHTING INITIATIVE
42 U.S.C. 17231 – ENERGY STORAGE COMPETITIVENESS
19 U.S.C. 1337 – UNFAIR PRACTICES IN IMPORT TRADE (United States International Trade Commission)
Sherman Antitrust Act, 15 USC 1-7
15 U.S. Code § 1 – Trusts, etc., in restraint of trade illegal; penalty
15 U.S. Code § 2 – Monopolizing trade a felony; penalty
Wilson Tariff Act, 15 USC 8-11
15 U.S. Code § 8 – Trusts in restraint of import trade illegal; penalty
Clayton Act, 15 USC 12-27
15 U.S.C. 45 – UNFAIR METHODS OF COMPETITION UNLAWFUL; PREVENTION BY COMMISSION (Federal Trade Commission)