Nation states have started to prepare for once a vaccine against Covid-19 has been found. The USA has been especially active, securing early access to such a vaccine by signing deals with domestic but also European companies. Compulsory licenses are widely seen as an instrument to break such nationalism. How does this mechanism work?
Compulsory licenses can be granted when someone has found and patented a drug or a vaccine. Once a patent has been granted, the patent holder can allow someone else to use his invention with a voluntary, contractual license. That’s the normal case.
On the other hand, a compulsory license is never voluntary. The prerequisite for such a license is two-fold. First the company, who wants to obtain a compulsory license, must have tried to obtain a voluntary license and have been turned down. Second the license must be in the public interest.
There are international legal requirements to compulsory licenses, particularly in the TRIPS agreement, but decisions are reached on a national level. In Germany it is the Federal Patent Court who has to decide whether to grant a compulsory license. Such a decision would have two consequences. Firstly, the license is not exclusive, further licenses can be granted and secondly, a compulsory license is not free. The patentee must be compensated.
Before Covid-19 were compulsory licenses a common tool?
Not at all. They are more a sword of Damocles than a real tool, meaning they are helpful in order to threaten patent holders to grant a license. In Germany I only know of two cases where compulsory licenses were granted.
Can you see a pattern in those cases?
Both were cases belonging to the pharmaceutical sector. In both cases, the companies seeking the compulsory licence wanted to offer a drug with fewer side effects, which would have infringed the patent. I am not aware of a compulsory licence case, where in Germany there was no medication available to treat a disease. This is probably due to the fact that pharmaceutical manufacturers are usually very interested to serve the German market, as it pays well.
But now experts warn the USA or China could use their possible patents on a Covid-19 vaccine as leverage to achieve geopolitical goals.
If supply to a market is refused and a voluntary license is also refused, one possibility would indeed be to grant compulsory licenses. Already having this option limits the leverage a potential patent holder would have.
This mechanism gives a chance to force a potential patent holder to make its innovation available. Does it therefor pose a threat to research and development of a vaccine?
In Europe, drugs are mainly developed by the private sector. Perhaps this is the best solution, as the private sector has the laboratories and the staff. Research is time-consuming and expensive. For a company to invest into this, you have to give an incentive. Patents grant their owners the right to use inventions exclusively for up to twenty years. This allows them to refinance their expenditure. If everyone can use this drug immediately, the inventor has no way of making money with it. That being said, it may well be possible that companies may pledge to offer licenses voluntarily. Especially in the IT sector patent holders have been known to make their patents available voluntarily with a so-called patent pledge. For a certain period of time, everyone is allowed to use the inventions of certain companies. It would be a reasonable consideration that during the acute crisis period, everyone is allowed to produce the substance and then at a later point of time patent protection is revived.
In addition to compulsory licenses some states have lately updated their laws in order to be able to challenge patents.
The German government has decided to extend the Infection Protection Act. Now instead of the whole government the Federal Ministry of Health alone can issue a so-called usage order. In such a case no company has to request a compulsory license, but the government orders it to free up a patent for use. However, the requirements for this are very high. It must be “in the interest of public welfare” or there must be an “extreme situation”. The order is the strongest intervention in a patent law. While in Germany there have been few cases of compulsory licenses since 1945, there has never been a case of a state order.
Can such a law or a compulsory license assist European citizens in order to get early access to a possible vaccine?
This depends on many factors. Currently it’s too early to predict what will happen next. Who finds a vaccine? Who provides it? If patent holders do not want to supply Germany because their motto is “America First”, then compulsory license could be a solution. In the event of supply bottlenecks, this presupposes that we have a domestic manufacturer who can produce the vaccine.