Source: https://www.pepperlaw.com/publications/compulsory-ip-licenses-for-covid-19-relief-beyond-the-defense-protection-act-2020-04-28/
Timestamp: 2020-05-31 14:12:19
Document Index: 317074119

Matched Legal Cases: ['§\u202f1498', '§ 1498', '§ 247', '§355', '§ 247', '§ 247', '§ 203', '§ 203', '§ 203', '§ 271']

Compulsory IP Licenses for COVID-19 Relief: Beyond the Defense Protect...
Compulsory IP Licenses for COVID-19 Relief: Beyond the Defense Protection Act
Authors: Sushmitha Rajeevan, Maia H. Harris, Robert Schaffer and Robert E. Browne Jr.
Stakeholders in intellectual property rights face enforcement and reputation challenges arising from the coronavirus emergency. Patents, trademarks and copyrights associated with pandemic countermeasures may be subject to compulsory licenses. As COVID-19 cases surge, work on personal protective equipment (PPE), medical devices, vaccine research and drug development has risen exponentially. The U.S. government has compelled private companies to produce materials, such as much-needed ventilators, under the Defense Production Act. The FDA has authorized New York and other state governments to develop their own coronavirus tests.
Private companies are working at an unprecedented pace, at times using federal funding and being granted emergency approval to do so. Some companies have redirected efforts, even their core businesses, to the production of urgently needed materials. Companies developing new countermeasures are most likely filing patent applications, but enforceable rights will likely lag behind the deployment of successful products and services. Companies with existing rights may find them difficult or unpopular to enforce. For example, a company may decide to produce a ventilator part using 3D printing technology, without necessarily thinking too much about the existence of third patent rights, because they are saving lives in an emergency. Distinguishing between true emergency relief efforts, on the one hand, and opportunistic infringers or price-gougers, on the other hand, is also an issue. Adding to the confusion, existing U.S. laws, possible legislation and marketplace realities may allow for compulsory licensing of IP, under terms a patent owner would otherwise not accept. Under this backdrop, and given the potential for tension between intellectual property rights and the need for rapid emergency action, it can be unclear to decision-makers and stakeholders how best to proceed.
Despite these uncertainties, a heightened “business as usual” approach should work for most stakeholders. Innovators can pursue, exploit and license their IP during and after the pandemic, under negotiated terms. Users of IP can investigate freedom to operate and seek licenses as they ordinarily would. These activities may proceed more quickly, and negotiations may encompass new or shifted priorities, but the process is fundamentally the same.
That said, laws are already in place that may require companies to grant compulsory licenses for the use of their intellectual property, prospectively and retroactively. Though rarely invoked, these crisis-oriented protections are in play, and may shield providers of coronavirus countermeasures from charges of patent, trademark and copyright infringement — particularly if a rights-holder is pursuing “unreasonable” terms. Some companies are volunteering reduced or royalty-free licensing, or to suspend enforcement of their intellectual property rights, in order to enable the quick development and manufacture of emergency medical equipment, tests, vaccines, and treatments. Other companies are open to crisis-oriented negotiations. Further, new legislation may call for clearer or more comprehensive compulsory licensing, particularly in cases where IP rights are perceived as blocking an unmet live-saving need. This article reviews several existing U.S laws, how some foreign countries have been approaching the concept of compulsory licensing during the COVID-19 crisis, and what U.S.-based companies might want to think about in the meantime and in the absence of additional legislation or clearer guidance.
Relevant Statutes in the United States
Defense Production Act. Currently, the United States has emergency powers derived under the Defense Production Act of 1950 (DPA). The DPA empowers the government to direct industrial production during an emergency. However, manufacturers engaged in such production are not protected against patent infringement claims. They may avoid damages for infringement (if any), under the “government-use” provisions of 28 U.S.C. § 1498(a), but only if the accused products are made under a federal contract that specifically includes this protection. Since many COVID-19 related production will be for sale to, and use by, nonfederal entities (such as hospitals or states), this production may not be protected as a “government use.”
As a result, simply responding to production requirements under the DPA is not, by itself, a protection against potential claims of infringement. On the other hand, patent owners also face risks because 28 U.S.C. § 1498 does not result in automatic payment of royalties. The patent owner must seek compensation from the U.S. government (not the contractor) in the Federal Court of Claims.
The PREP Act. Another statute is the Public Readiness and Emergency Preparedness Act (PREP Act), 42 U.S.C. § 247d–6d. On March 10, 2020, the Department of Health and Human Services (HHS) issued a COVID-19 Declaration under the PREP Act, effective from February 4, 2020 through October 1, 2024. See "HHS Provides Liability Immunity for Coronavirus Countermeasures" (Mar. 16, 2020). The Declaration shields “manufacturers” and “distributors” of coronavirus countermeasures, as well as “program planners” and “qualified persons” from liability. “Covered Countermeasures are any antiviral, any other drug, any biologic, any diagnostic, any other device, or any vaccine, used to treat, diagnose, cure, prevent, or mitigate COVID-19 . . . , or any device used in the administration of any such product, and all components and constituent materials of any such product.” On March 15, “respiratory protective devices” were made a priority. Products and services that increase the efficacy of a countermeasure or minimize adverse events are also protected. However, willful misconduct causing death or serious physical injury is not exempt from liability.
FDA-approved products are unequivocally protected by the PREP Act. It is less clear whether countermeasures or activities not requiring approval are covered. Another wrinkle is whether the FDA can or will approve generic or “me too” products or medical devices that are protected by patents, for example under the Drug Price Competition and Patent Term Restoration Act, 21 U.S.C. §355(j) (Hatch-Waxman).
Although it has not been done before, the PREP Act could potentially be asserted as a defense to claims of patent infringement. On its face, “any type of loss” is covered, e.g., “loss of or damage to property, including business interruption loss.” 42 U.S.C. § 247d-6d (a)(2)(A)(iv). The immunity expressly “applies to any claim” having a causal relationship with a covered countermeasure. 42 U.S.C. § 247d-6d (a)(2)(B). Hypothetical individuals making a patented ventilator part, for example by 3D printing, could claim they are immune from damages for infringement as “covered persons” engaged in countermeasure activities under the PREP Act. The PREP Act has a fund to compensate individuals who suffer injuries as the direct result of a covered countermeasure, but this would not protect a patent owner from infringement losses.
Ultimately, if the PREP Act is used to shield providers of countermeasures from patent infringement, it does not provide patent owners with a reciprocal compulsory license or mitigating compensation. Instead, patent owners may have recourse to sue the government for compensation, e.g., a compulsory royalty, by alleging the PREP Act caused a “taking” of property by eminent domain. Indeed, the United States could “take over” a countermeasure patent by eminent domain, even without the PREP Act, under Title 28 of U.S. Code Section 1498. Particularly in the case of critical vaccines or drugs, the government could undertake to practice the patented countermeasure, or authorize others to do so on its behalf, in order to meet the enormous supply needs this emergency demands. In this scenario, the patentee would have to seek compensation in the Court of Federal Claims.
Bayh-Dole. Another statute is the Bayh-Dole Act of 1980 (codified in 35 U.S.C. § 203), which allows the U.S. government to exercise “march-in rights” for any invention conceived or first actually reduced to practice in the performance of work under a federal funding agreement. In certain circumstances, the government can require that licenses be granted to other parties or to grant licenses itself, if the patent owner refuses to do so. Those circumstances include that a compulsory license is necessary (1) because the patent owner has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the invention or (2) in order to alleviate health or safety needs that are not reasonably satisfied by the patent owner or its licensees. See 35 U.S.C. § 203(a)(1)-(a)(2). If the federal government does exercise this right, those adversely affected by the decision may appeal to the U.S. Court of Federal Claims. 35 U.S.C. § 203(b). Although a compulsory license may be available, only eligible federally funded patentees would benefit, and not quickly.
None of these statutes provides comprehensive protection to either patent owners or to those responding to the crisis and concerned about potential infringement. It is not too surprising that calls for legislation or administrative actions to provide more protection are being made from a variety of sources. These ideas include barring the grant of exclusive licenses for the production of COVID-19 related materials, protecting manufacturers of COVID-19 countermeasures from liability, stripping patent owners of their rights if found to price gouge, and imposing mandatory compulsory licenses. Compulsory licensing is already in place or being considered in other countries, which may provide guidance in the Unites States.
Compulsory License Models in International Jurisdictions
Israel is the only country known to have issued a compulsory license during the pandemic. It did so by authority of its existing patent statute, which permits the government to exploit any invention in the interests of the national security or of the maintenance of essential supplies and services. The patent owner will be compensated but has no right to a judicial review.
In March 2020, Germany passed the Prevention and Control of Infectious Diseases in Humans Act, and Canada enacted the COVID-19 Emergency Response Act (Bill C-13). These laws allow the government to suspend patent rights or issue compulsory licenses during the pandemic. Broadly, these licenses will expire after one year, or earlier if the health emergency is ended. The patent owner must be notified of any such license, is entitled to equitable remuneration, and may appeal. Discussions of similar approaches appear to be ongoing in other countries, including Australia , Brazil, Chile and Ecuador.
Compulsory licensing is permitted under the World Trade Organization’s (WTO’s) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and subsequent Doha Declaration. Although WTO members are required to make patents broadly available, they may be excluded if necessary to protect “human life or health,” or if directed to “diagnostic, therapeutic and surgical methods for the treatment of humans” (Article 27). In a more limited way, Article 30 has been used to allow development and/or approval of generic drugs before the expiration of a patent. An example in the United States is the “safe harbor” provision of 35 U.S.C. § 271(e)(1), which shields certain drug development activities from patent infringement. This could conceivably be expanded to encompass pandemic or COVID-19 countermeasures. Under Article 31, ad hoc and time-sensitive compulsory licensing is likely possible, if potential first infringers try to get an “okay” from the patent holder on “reasonable commercial terms” before invoking a compulsory license, which must provide “adequate remuneration” — except for a “national emergency” or for reasons of “extreme urgency.” New legislation in the United States would most likely be consistent with these considerations.
Strategies for Patent Owners and Potential Licensees
The U.S. government has not (yet) explicitly addressed intellectual property rights for COVID-19 countermeasures, including necessary response products such as PPE, tests, vaccines and treatments. Patent owners and manufacturers seeking to meet urgent medical needs must consequently remain vigilant about protecting their own patent rights and infringing the rights of others. While these steps would be taken ordinarily, as a matter of due diligence, they are heightened, more rapid, and made more difficult by the urgency of responding to the pandemic.
Here are some takeaways, at least until new legislation (if any) is enacted.
Patent your innovations as you usually would. Consider making patent applications “special” or “Track 1” under appropriate rules, for faster examination by the USPTO.
For existing patents, be prepared to partner more broadly with third parties, to turbocharge the R&D and supply pipelines.
Potential licensees should evaluate freedom to operate and proactively seek licenses.
Consistent with TRIPS, negotiate acceptable commercial terms for any licenses, which should be justified as “reasonable” under the circumstances of the pandemic.
Licensors and licensees should contemplate tailored indemnity provisions, including with purchasers and relevant government agencies.
Patent owners that benefit from federal funding should be particularly vigilant and proactive. While the risk may be historically low, the U.S. government does have authority to allow the use of its funded intellectual property by third parties, particularly in an emergency.
For drugs and devices that require FDA approval, the agency may or may not act as a “gatekeeper” by delaying approval of patented products until any patent dispute is resolved.
So far, the U.S. Congress has not introduced legislation to balance the tension between intellectual property rights and the urgent need for effective countermeasures. Compulsory licensing is one approach taken by other countries and may be debated here. Stakeholders should monitor for developments, and may consider advocacy, when the time comes. For now, all of the usual steps should be taken to protect your IP rights and assess your freedom to operate — with elevated awareness and flexibility.
Sushmitha Rajeevan
Associate | 617.204.5129
Robert E. Browne Jr.