Lead Author: Brook Baker
Additional Authors: Peter Maybarduk, Public Citizen; Steven Knievel, Public Citizen
Organization: Health Global Access Project (Health GAP)
Supporters: Amy Kapcyzynski & Gregg Gonsalvez, Global Health Justice Partnership, United States; Morgane Ahmar, Coalition-Plus, France; Marcus Low, Treatment Action Campaign, South Africa; Prof. Sean Flynn, American University Washington College of Law Program on Information Justice and Intellectual Property, United States; Luz Marina & Francisco Rossi, Fundación IFARMA, Colombia
This submission discusses the desirability and feasibility of a compulsory licensing (CL) facility/consortium that would:
(1) undertake analytical work on the involuntary use provisions in the World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, including the possibility of mandatory CL standards and procedures for medical technologies,
(2) develop and support the implementation of model legislation to maximize full and effective use of compulsory and government use (GU) licenses, and
(3) provide technical and advocacy assistances for adopting and using CLs not only nationally but in a coordinated way to create the aggregated markets that encourage robust generic competition.
Compulsory licenses are an essential tool for expanding access to patented medicines, including improved combination therapies and optimal formulations. At present, the use of CLs is sparse and uncoordinated. A few countries, particularly in Africa, have formally and informally issued CLs to facilitate access to medicines, particularly antiretroviral therapies. There have been additional licenses issued in Thailand, Indonesia, Brazil, India, Ecuador, and elsewhere, but countries that have issued CLs often face retaliatory trade and other pressures, from certain countries and from industry. Industry’s backers frequently argue that CLs should rarely be used, or used only in emergencies, although in fact countries’ rights to issue CLs are broad.
In the post-TRIPS era, more and more health technologies will be patented in more and more countries. The resulting expansion of exclusive rights gives rightholders power to charge exorbitant prices that reduce access to health technologies, especially in low- and middle-income countries, but in richer countries as well. Increased, easier, and coordinated use of compulsory licenses on medical technologies will promote competition, lead to lower costs, and expand access to needed health products while allowing reasonable compensation to rightholders.
On Countries’ Rights to Issue Compulsory Licenses
Since the 19th Century, national legislation in most countries has allowed compulsory and GU licenses. Article 5A of the Paris Convention for the Protection of Industrial Property provides each country with the right to “grant compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent...” States’ practices across the globe allow both CLs and GU licenses. Canada, until the negotiation of the North American Free Trade (NAFTA) Agreement, had a particularly rich history of issuing CLs to decrease the cost of medicines and to spur local industry, and it allowed licensees to export in order to realize economies of scale.
Similarly, Article 31 of the TRIPS Agreement directly permits involuntary use of patents without authorization of the right holder (also known as CLs) and public non-commercial use (also known as government or crown use). Under Article 31, CLs can be issued on any grounds whatsoever as long as certain procedural requirements are followed. There are expedited procedures requiring no advance negotiations “in situations of national emergency or other circumstances of extreme urgency or in case of public non-commercial use”, or as a remedy for anti-competitive practices. The Declaration on the TRIPS agreement and public health (Doha Declaration) clarified the ability of countries to define grounds for CLs, to determine matters of emergency and extreme urgency, and to use CLs to advance public health and to ensure access to medicines for all. In addition, paragraph 6 of the Doha Declaration directed WTO members to find an effective and expeditious solution to the “predominantly for the supply of the domestic market of the Member authorizing such use” requirement in Article 31(f) of the TRIPS Agreement, resulting in the 30 August 2003 WTO Decision on implementation of Paragraph 6 of the Doha Declaration (30 August Decision) providing a partial solution for CL-related access for countries with insufficient manufacturing capacity to make effective use of CLs. There is also authority under Article 44.2 of the TRIPS Agreement justifying use of judicially authorized licenses upon payment of a royalty.
On the Underuse of Compulsory Licensing
Despite the clear legality of CLs and GU licenses, few countries have adopted national legislation incorporating desirable flexibilities for issuing CLs. Even where CLs are authorized by sub-optimal national legislation, few CLs have been issued. Earlier surveys of post-TRIPS compulsory licenses on medicines have found only a surprisingly small number of examples, but have also found instances of such licenses issued without controversy in richer countries.
Part of the problem is that rightholders and certain rich-country governments have frowned on the use of CLs. Not only have these governments urged countries not to issue CLs, but have retaliated when countries did so. For example, the Office of the United States Trade Representative (USTR) has placed countries on the U.S. Special 301 Watch List because they issued CLs or because their national legislation permitted CLs on the basis of local working requirements. One company, Abbott Laboratories (now AbbVie), retaliated against Thailand for issuing a CL on an AIDS medicine by removing all of its pending registration applications from the country’s drug regulatory process.
However, it is also true that CL options are not always well-understood and that proper technical assistance on CL reform and issuance has been scant. In addition, issuing a successful CL depends on a willing licensee who is able to develop the product, register it, and bring it to market. Companies might be willing to do this in larger and richer countries, but the economic incentives are weak in smaller and poorer countries. Single-country licenses are ineffective to incentivize robust generic competition by multiple licensee/entrants competing at efficient economies of scale producing sustainable cost savings.
If the TRIPS regime stays in place, if national patent systems continue to grant more pharmaceutical patents, and if voluntary licensing and other access initiatives continue to exclude a significant number of pharmerging countries, then countries will need reliable, easy-to-use, TRIPS-compliant mechanisms to source more affordable medical technologies. That mechanism is compulsory licenses.
Proposed Activities of the Facility
Despite widespread knowledge that broader use of CLs might surmount access barriers, a significant amount of analytical work remains in clarifying the outer-bounds of permissible CL practice in TRIPS and other forums. That analytical work will lay fallow, as does some of past work on CLs, unless it is translated into actionable proposals for CL reform in-country, both through model law and technical support to policy makers, legislatures, and regulators. Even after law reform is accomplished, additional work is needed to promote effective use of CLs and coordination between countries to create a timely and effective market for generic competition.
A CL facility/consortium could help the delivery and coordination of all this work as described below.
1. Further work on TRIPS compatibility of mandatory and/or presumptive compulsory licensing mechanisms. Although Art. 31 of the TRIPS Agreement requires that compulsory licenses be considered on their individual merits, that requirement may not preclude mandatory CL mechanisms. The August 30 Decision (proposed Article 31bis) may allow mandatory CLs as provided by India. Alternatively, there is no TRIPS bar to a presumption in favor of CLs.
2. Further work on TRIPS compatibility of differentiated CL policies for different fields of technology, especially medical technologies. Although the Article 27 of the TRIPS Agreement prevents discrimination between fields of technology in the recognition of patents, that provision does not apply to Article 31 so as to bar different CL policies for different fields of technology. Similarly, a leading analytic group argues that frequent use of CL and GU licenses for medicines would not constitute prohibited discrimination against a field of technology.
3. Further work on open- and non-exclusive-CL standards and procedures, especially where prior negotiations are required. In some instances, licensing a single generic licensee or only a few licensees might be desirable, but having multiple licensees who can complete and provide redundant sources of supply is generally superior.
4. Further work on competition-based licenses, grounds and procedures. Competition-based licenses have advantages because they do not require prior negotiations, allow for unlimited exports and lower royalties, and require attention to the interests of licensees. Defining the grounds for competition-based licenses and procedures needs further exploration.
5. Further work on judicial licenses. Article 44.2 of the TRIPS Agreement allows the equivalent of judicial CLs – the payment of reasonable royalties in lieu of injunctions or deterrent damages. Such licenses have been broadly available in the U.S. and issued once in India. Further clarification of the availability of judicial CLs should be pursued.
6. Further work on Article 30 alternatives to the 30 August Decision (or Article 31bis, if adopted), including a TRIPS Article 30 limited exception. The 30 August Decision has only been used once in twelve years. It is procedurally labyrinthine and might be interpreted to require successive licenses for each desired quantity of a particular medicine in an importing country. The ability of countries to issue a single license that would permit export and import of needed quantities should be explored. In addition, the possible legality of an Article 30 limited exception allowing production for export, proposed during the negotiation of the Decision, should be explored.
7. Further analytical work on changed conditions that might lead to termination of CLs. Article 31 authorizes termination of a CL when the conditions justifying its issuance have ceased to exist. However, the circumstances sometimes are uniquely under the control of the rightholder who might actually manipulatively offer price discounts or otherwise redress grounds, undermining the commercial feasibility of the CL for the licensee and undermining the benefits of competition and redundant sources of supply for the affected country.
8. Further work on comparative advantages of all-sector CLs vs. GU licenses. Countries can issue “ordinary” compulsory licenses that allow licensees to service all sectors, or they can issue public, non-commercial licenses for use by or for the government only. GU licenses do not require search of patent status nor prior negotiation for a commercially reasonable voluntary license. Moreover, they leave the more lucrative private sector to the rightholder, thereby reducing the risk of retaliatory action. Further work should be done on the comparative advantages of GU versus all-sector licenses.
9. Further work on march-in rights to IP generated with public support, including rights to licensee’s patented improvements. CL practice can and should be much more liberal where R&D is publicly financed. Clarifying governments’ licensing rights in such circumstances is important to expanded access.
10. Further work on CLs on pending patents. Some countries do not appear to allow CLs on pending patent applications, though medicines may be registered and marketed before patents are granted or during appeals. In order to facilitate earlier access to newer medical technologies there may be advantages to granting CLs on pending applications subject to safeguards and conditions.
11. Further work on special rules for CLs on research tools and platforms and for CLs on dependent technologies. There is a special need to assess CLs on the tools needed to conduct R&D and on base technologies underlying improvements and adaptations, including combination medicines.
12. Further work on compulsory licenses to registration-related data for the purpose of registering compulsorily licensed generic equivalents of patented medicines or other lawful generic equivalents. Data/market exclusivities can delay or prevent marketing approval of generic medical technologies even when CLs are issued or where there is no patent on the commodity itself. Therefore, it is important to elucidate grounds and proper procedures for allowing permissible access to and reliance on regulatory data or prior approvals of comparator products.
13. Further work on CLs to know-how. Patent disclosure is supposed to allow effective working of the patent by other skilled in the arts, but frequently rightholders have trade-secret protected know-how that is important to the effective use of a CL. Therefore it is important to elucidate grounds and proper procedures for allowing permissible use to know-how.
14. Further work on the relationship between CLs and industrial policy/local production. Compulsory licenses can be satisfied by granting licenses to domestic licensee or to foreign importers. However, many countries want to expand their pharmaceutical manufacturing capacity both as an industrial development policy and also to ensure local sources of supply. Better understanding of the economics of local production and its interface with CL policies will help inform governments when to issue local licenses, import licenses, or hybrid licenses.
15. Further work analyzing market dynamics of CLs and market size necessary to incentivize generic licensees to enter the market. The economics of robust generic competition should be better understood, including incentives to become licensees and conditions that support sustainable competition. Such studies might identify different market needs for different health technologies.
16. Further work on regional CLs, e.g., for the African Intellectual Property Organisation (OAPI) and other regional IP entities. At present, regional IP entities like the OAPI and African Regional Industrial Property Organisation (ARIPO) allow for CLs on a national basis only. Given similar medical needs in these regional groups, member countries might find it desirable and expeditious to allow for regional grants of CLs and GU licenses.
17. Further work on transparency of voluntary licenses and CLs. Countries could consider a system of mandatory disclosure of voluntary and involuntary licenses and modify trade-secret laws to the extent that they might impede such disclosure.
18. Further work on patent status transparency on medical technologies to ease the CL process. Countries should consider adoption of requirements that patent applicant or patent rightholders disclose the identity of the medical technology to which the patent application or granted patent applies. In the pharmaceutical context, this might include the disclosure of the international non-proprietary name.
CL Model Legislation and Law Reform
Most countries have not yet optimized their compulsory licensing laws and regulations. Model law provisions can assist the desired law reform process, and countries might further need specific technical assistance for competent and effective CL law reform in a particular country or regional grouping. The facility can provide mechanisms for providing CL-related law reform support nationally and regionally, e.g. ARIPO, OAPI. The Facility can:
1. Perform further work on desirable CL terms and conditions in terms of quality, registration efforts, freedom to research, etc. Governments can and should define proper standards or conditions for licensees including commercially expeditious registration, marketing, and adherence to recognized good manufacturing and distribution practices.
2. Develop model CL provisions, including, among other provisions –
a. Grounds for CLs: Compulsory licensing laws should provide for the widest possible grounds for CLs without thereby requiring onerous standards of proof. In particular, there should be health-related grounds, refusal-to-license grounds, insufficiency of affordable supply grounds, emergency grounds, and competition-based grounds. Countries might also want to consider adoption of failure-of-local-working grounds.
b. CL procedures: Countries should adopt easy-to-use administrative procedures for both CLs and GU licenses. They should require short time periods for required prior negotiations and further define commercially reasonable and unreasonable terms.
c. Appeal mechanisms: CL applications could be deemed presumptively valid with short time periods for opposition by rightholders on narrow grounds. Rightholders should bear the burden of persuasion.
d. Royalty guidelines: Countries should also adopt easy-to-apply remuneration guidelines.
In-Country Technical Assistance and Advocacy Support
When proper CL legislation and regulations are in place, technical assistance is frequently helpful in establishing the practice of issuing licenses, overcoming knowledge gaps and resolving uncertainties than can freeze action. Further, achieving proper incentives for generic entry and robust competition might well depend on coordination of CL strategies between countries. At present, there is not a fully capacitated platform for such coordination, but it is important that it be developed. Support from Facility technical experts can help guide and coordinate in-country advocates and policy makers across borders. The Facility can:
1. Create a facility that will directly assist countries and other applicants on CL applications; amassing global, regional, and local technical expertise to facilitate the reform process.
2. Help supply campaign strategies and support for local reform advocates, as well as needed advocacy materials in collaboration with national or regional efforts. The IP reform process in any country rarely proceeds smoothly without advocacy support both to decision-makers and to civil society proponents.
3. Work on coordinated issuance of CLs on key medicines, particularly for countries that are currently excluded from relevant Medicines Patent Pool (MPP) licenses.
4. Help establish the political partnership within BRICS and other middle-income countries (MICs) formations for issuance of such CLs and to broker the issue of industrial policy. BRICS countries and other pharmerging MICs face particular challenges in accessing more affordable essential health technologies. It will be important to explore options for strengthening coordination within and between BRICS and other MICs to make coordinated use of CLs most effective.
5. Analyze whether the facility would support generic firm applicants directly, and if so, under what terms and conditions, given potential conflicts of interest. Although governments are sometimes the prime movers with respect to CLs, CLs can and should also be available based on initiation of CL applications by private generic companies. The facility should explore if, when, and how it might provide technical assistance and other support to such efforts.
6. Help defend CLs when challenged or appealed. Because of industry opposition to CLs, it is foreseeable that rightholders will challenge CL reform efforts and/or the issuance of particular CLs. The facility could provide technical and legal support in defense of CL policies and CL grants.
Benefits of the Facility
This submission has potential to significantly reduce policy incoherence between the interests of innovators and the human right of access to needed health technologies. Most CLs and GU licenses provide for adequate remuneration to rightholders, meaning that originators can receive reimbursements for R&D expenditure in the form of royalty payments from generic licensees. At the same time, the increased affordability resulting from licensee competition and generic cost-structures can greatly enhance access to health technologies.
The human right to health and of access to needed health technologies requires governments to make progressive and maximum use of lawful flexibilities to increase universal and equitable access to the benefits of scientific advancement in the health sector. Compulsory licenses are fully lawful under existing international IP norms. Accordingly, countries can and must use this available policy space by amending their laws to allow full use of lawful compulsory licensing flexibilities and to use those flexibilities to ensure access for all.
The health impact of this initiative could be quite significant. Where law reform occurs and CLs are actually issued on a more routine basis, it is clear that improved access to health technologies will occur. In addition, the mere prospect of increased use of compulsory licenses could result in more countries being included in voluntary licenses and/or being granted other, better access terms.
The implementation of this submission would not be difficult as a technical matter. There is a significant amount of technical expertise on compulsory licensing available already. This capacity needs to be rationalized and supported and organized into an effective analytical and service delivery model. Although there might be some opposition to CL reform and utilization from industry and certain countries, such opposition does not have a sound political, legal, or moral footing. Moreover, countries might face less political opposition if they act in concert with others, pursuant to a global initiative, than if they act individually on their own. More importantly, coordinated action will produce better impacts in terms of CLs that will actually achieve their goal of facilitating cost-saving competition for needed health technologies.
Bibliography and References
 Public Citizen, Post-TRIPS Examples of Compulsory Licensing for Pharmaceuticals Worldwide, available at http://www.citizen.org/documents/compulsory-licenses-chart-short-version.pdf.
 Dina Halajian, Inadequacy of TRIPS & The Compulsory License: Why Broad Compulsory Licensing is Not A Viable Solution to The Access to Medicine Problem, Vol. 38:3 Brook. J. Int’l L. (2013); Ben Sihanya, Patents, Parallel Importation and Compulsory Licensing of HIV/AIDS Drugs: The Experience of Kenya, WTO, available at https://www.wto.org/english/res_e/booksp_e/casestudies_e/case19_e.htm. See Public Citizen, Kaletra – Abbott’s Abusive Practices, available at http://www.citizen.org/abbottabusivepractices.
 The Paris Convention is an intellectual property treaty covering industrial property: patents, trademarks, industrial designs, utility models, service marks, trade names, and geographical indicators. WIPO, Summary of the Paris Convention for the Protection of Industrial Property (1883), available at http://www.wipo.int/treaties/en/ip/paris/summary_paris.html.
 Jerome H. Reichman & Catherine Hasenzahl, NON-VOLUNTARY LICENSING OF PATENTED INVENTIONS: HISTORICAL PERSPECTIVE, LEGAL FRAMEWORK UNDER TRIPS, AND AN OVERVIEW OF THE PRACTICE IN CANADA AND THE USA (2003)
 The Agreement on TRIPS is an international agreement administered by the WTO that sets minimum standards for intellectual property laws for WTO Members and introduces intellectual property law into the international trade system.
 See TRIPS Article 31.
 The Doha Declaration was adopted by the WTO Ministerial Conference of 2001 in Doha. It reaffirmed flexibility of TRIPS member states in circumventing patent rights for better access to essential medicines.
 Cecilia Oh, Compulsory licenses: recent experiences in developing countries, 1 INT’L J. INTELLECTUAL PROP. 22-36 (2006); Reed Beall & Randall Kuhn, Trends in Compulsory Licensing of Pharmaceuticals Since the Doha Declaration: A Database Analysis, 9:1 PLOS MED e1001154 (2012).
 The Special 301 Report is prepared annually by the Office of the United States Trade Representative under Section 301 as amended of the Trade Act of 1974. The reports identify trade barriers to U.S. companies and products due to the intellectual property laws in other countries. The annual report list a “Priority Watch List” and a “Watch List” containing countries whose intellectual property regimes are deemed of concern.
 Public Citizen, Public Health Groups Launch Global Campaign Against Abbott Lab’s Monopoly on Critical AIDS Medicine (Nov 2011), available at http://www.citizen.org/pressroom/pressroomredirect.cfm?ID=3451 “After Thailand issued compulsory licenses on AIDS, cancer and heart disease medicines, Abbott retaliated by withdrawing plans to sell several new drugs in the country, and the U.S. government attacked Thailand on a trade watch list. Many countries are hesitant to stand against this pressure.”
 Carlos Correa, Integrating Public Health Concerns Into Patent Legislation In Developing Countries, The South Centre at 99 (2000); James Love, Compulsory Licensing: Models for State Practices in Developing Countries, Access to Medicine and Compliance with the WTO TRIPS Accord, IPR Series Third World Network (2004); Frederick M. Abbott, Compulsory Licensing for Public Health Needs: The TRIPS Agenda at the WTO After the Doha Declaration on Public Health, Quaker United Nations Office (2002).
 World Health Organization, World Intellectual Property Organization and WTO, Promoting Access to Medical Technologies and Innovation: Intersections between public health, intellectual property and trade (2012), available at https://www.wto.org/english/res_e/booksp_e/pamtiwhowipowtoweb13_e.pdf; Rebecca Goulding and Amrita Palriwala, Patent Pools: Assessing Their Value-Added for Global Health Innovation and Access, Results for Development Institute (Sep 2011); Rebecca Goulding and Amrita Palriwala, Patent Pools: Assessing Their Value-Added for Global Health Innovation and Access, Results for Development Institute (2012).
 See Indian experience in Supreme Court Says No to Bayer, Upholds Compulsory License on Nexavar, infojustice.org (Dec 2014), available at http://infojustice.org/archives/33690 The Indian generic drug company Natco obtained the compulsory license to produce generic version of Bayer’s cancer drug from the Indian Patent Office, bringing down the drug’s price by 97% per person per month in exchange for which Natco pays Bayer a royalty fee; See Knowledge Ecology International, KEI Research Note: Recent United States Compulsory License (Mar 2014), available at http://www.keionline.org/misc-docs/recent_cls_8mar07.pdf In multiple cases, the court granted royalty rate for ongoing damages in lieu of a permanent injunction.
 See WTO News, Decision removes final patent obstacle to cheap drug imports, available at https://www.wto.org/english/news_e/pres03_e/pr350_e.htm. The 30 August 2003 decision “takes the form of an interim waiver, which allows countries producing generic copies of patented products under compulsory licenses to export the products to eligible importing countries. The waiver would last until the WTO’ intellectual property agreement is amended.”
 Article 31bis is an additional article after Article 31 as a part of TRIPS Agreement amendment. It allows pharmaceutical products made under compulsory licenses to be exported to countries lacking production capacity.
 Judit Rius Sanjuan, James Love and Robert Weissman, Protection of Pharmaceutical Test Data: A Policy Proposal, KEI Research Paper 2006:1.
 United Nations, Investment in Pharmaceutical Production in the Least Developed Countries: A Guide for Policymakers and Investment Promotion Agencies (2011).
 Kurt R. Brekke, Chiara Canta, and Odd Rune Straume, Does Reference Pricing Drive Out Generic Competition in Pharmaceutical Markets? Evidence from a Policy Reform, TSE (Dec 2015); Luke M. Olson and Brett W. Wendling, The Effect of Generic Drug Competition on Generic Drug Prices During the Hatch-Waxman 180-Day Exclusivity Period, Federal Trade Commission Working Paper No. 317 (Apr 2013); Congressional Budget Office (CBO), Effects of Using Generic Drugs on Medicare’s Prescription Drug Spending, The Congress of the United States (Sep 2010); The OECD Competition Committee, Roundtables On Generic Pharmaceuticals, Organisation for Economic Co0operation and Development (2009); CBO, How Increased Competition From Generic Drugs Has Affected Prices and Returns in the Pharmaceutical Industry, The Congress of the U.S. (Jul 1998).
 OAPI came into being on 13 September 1962, which was to act as national office for industrial property for 16 members. Members include Benin, Burkina Faso, Cameroon, Central African Rep., Congo, Ivory Coast, Gabon, Guinea, Guinea Bissau, Equatorial Guinea, Mali, Mauritania, Niger, Senegal, Chad, and Togo.
 ARIPO was mainly established to pool the resources of its member countries in industrial property matters together in order to avoid duplication of financial and human resources. It currently has 19 States: Botswana, The Gambia, Ghana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Sierra Leone, Liberia, Rwanda, São Tomé and Príncipe, Somalia, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
 Brook K. Baker, Processes and Issues For Improving Access to Medicines: Willingness and Ability to Utilise TRIPS Flexibilities in Non-Producing Countries, UK DFID, Health Systems Resource Centre (2004).
 WHO, Stop TB Infection Control Subgroup of the TB/HIV Working Group and USAID, An Advocacy Strategy for Adopting and Dissemination of the WHO Policy on TB Infection Control in Health-Care Facilities, Congregate Settings and Households: Recommended Actions at International and National Levels (Apr 2010).
 See About the MPP on Medicines Patent Pool website, available at http://www.medicinespatentpool.org/about/.
 BRICS refers to countries of Brazil, Russia, India, China and South Africa.