The worry that patents, and other forms of IP rights, are a barrier in the fight against COVID-19 is a legitimate concern. After all, a patent is a temporary monopoly right granted to an inventor that allows her to exclude others from using, making, and selling the protected invention. Excluding others from using bright ideas may seem counterproductive in present times.
Patents are at the core of most innovative systems
Traditionally, patents are seen as a catalyst for research and innovation. In economics, knowledge is seen as a ‘public good,’ meaning that it is difficult to exclude others from using it and that the use by one person does not reduce its availability to other potential users. A given piece of knowledge usually generates more benefits for society as a whole than what a private actor can possibly extract from its creation and commercialization. Therefore, economists consider that the incentives that an innovator has in producing new knowledge are suboptimal from society’s viewpoint — and the patent system provides one way of increasing these incentives.
The pharmaceutical industry offers a compelling case for patent protection. Creating a new drug is risky, lengthy, and (very) expensive. Yet, once the active compound of a drug is identified and tested, copying it is usually easy, and producing the drug is very cheap. Therefore, without patent protection, few, if any, private companies would be in the drug development business. Put simply, the monopoly power that patent protection confers acts as a carrot that pushes firms to invest in research and development. However, patent protection is not a perfect incentive mechanism. Scholars have noted, among others, that recovery of research costs by patent monopoly reduces access to drugs and that market demand, rather than health needs, determines research priorities (e.g., Barton and Emanuel, 2005).
It is challenging to determine whether other incentive mechanisms would be superior to patent protection to foster medical research. Answering this question is beyond the scope of the present note. It is a fact that the technology space is patent protected, and some actors are rushing to file patent applications. As a result, the various parties involved in the search for solutions may inadvertently or willfully infringe on granted patents.
Patents can block the search for a solution, but they can also accelerate it.
The issue is real. BioFire Diagnostics, a medical device firm based in the United States, was recently sued by Labrador Diagnostics for patent infringement. BioFire launched three COVID-19 tests built off of the company’s technology, but that allegedly infringe on two of Labrador Diagnostics’s patents. The plaintiff demanded that the court forbid the firm from making those COVID-19 tests. In another widely discussed case, U.S. pharmaceutical company Gilead took several steps suggesting they were ready to enforce their patent rights related to COVID-19 candidate drug Remdesivir. An open letter signed by more than 140 NGOs asks Gilead to take action to ensure rapid availability, affordability, and accessibility of Remdesivir. The letter concludes by saying that an “exclusivity and monopoly-based approach will fail the world in combating the COVID-19 pandemic.”
At the other end of the spectrum, a couple of patent holders have already given up patent rights or granted free licenses to relevant patents. For instance, U.S. drugmaker AbbVie is reportedly waiving its right to exclusivity over patent-protected Kaletra, a combination of the antivirals lopinavir and ritonavir that is being used — and whose efficacy is still being tested — to treat patients with coronavirus. This would allow the production of generic versions of the drug to be made by others without the risk of being sued for patent infringement. In a lower-tech setting, French sporting goods company Decathlon is providing its patent protecting its snorkeling mask Easybreath for free. This mask has been first transformed by hospitals in the north of Italy as a protective mask and has later been adapted to be used in ventilators.
Individual initiatives of voluntarily sharing patents are a welcome development. To accelerate the trend, proposals such as the Open COVID pledge are emerging. Signatories to the pledge commit to making patents that could be used in ending the COVID-19 pandemic available for free and without encumbrances. Patent pledges are not new but their popularity seems to have increased in the recent past. Notable examples include the Open Patent Non-Assertion Pledge, in which Google pledges the free use of certain of its patents in connection with Free or Open Source Software, and the patent pledge by electric car company Tesla. Traditionally, patent pledges come with benefits for the patent holder, such as a greater adoption of its technology and a freer environment. In the present context, patent pledges have the potential to accelerate innovation by pointing to relevant patents, by offering some legal certainty to follow-on innovators (reinforced by the public commitment of the patent holder to the patent pledge), and by reducing transaction costs (that is, the cost of negotiating and drafting a contract with every potential user of the technology).
Finally, the creation of a ‘patent pool’ would be a clear catalyst in the search for a solution, and later vaccine adoption. Patent pools are a collection of patents from different patent holders available in bulk, for free or for a fee. Governments have already called on the WHO for the creation of a SARS-CoV-2 patent pool — the UN has already done so in the past, having established one for HIV drugs, tuberculosis and hepatitis C (Burrone et al. 2019). Because patents in a pool are available in one place, under clear terms, and generally at a reasonable price, they reduce litigation risks and lead to lower licensing fees and transaction costs among participating firms. Furthermore, medicine patent pools encourage the diffusion of drugs to developing countries with lower prices (see, e.g., Wang 2019 on HIV cocktails).
If voluntary contributions fail, governments can step in and force patent holders to share their inventions. Indeed, patent laws of many countries include ‘compulsory licensing’ provisions that allow governments to forcibly license a patented invention when there is a threat to public safety. Some countries have actually reinforced their legislative base to speed up compulsory licensing and generic drug production. NGOs such as Médecins Sans Frontières (MSF) actively call for governments “to prepare to suspend or override patents for COVID-19 medical tools by issuing compulsory licenses.”
Clearly, the first-best solution would be for private actors to act responsibly by providing a broad and affordable access to tests, drugs, and vaccines. Government intervention is certainly an option to consider — if only because the threat of compulsory licensing encourages patent holders to act responsibly. Actual implementation of compulsory licensing is challenging but a real option on the table.
This note is adapted from the report “COVID-19: Insights from Innovation Economists” prepared by a collective of scholars primarily affiliated to the College of Management of Technology at Ecole polytechnique fédérale de Lausanne, Switzerland. The full report is available on SSRN.