The COVID-19 (Coronavirus Disease of 2019) pandemic took the world by storm in 2020. Health sectors across the world struggled to reduce its disastrous impact in the absence of any effective medicine or vaccine. Pharmaceutical companies became fully engaged in the production of a vaccine or an effective drug which would give it a competitive edge in the global market.
But, it wasn’t the time to withhold or limit the sharing of patents for treatments. Rather, pharma companies realised that collaborative efforts through patent pooling and cross licensing would help to meet the global demand while keeping their royalties secured.
In this article, we will explore the role of patent pooling and cross licensing in managing a pandemic.
Definition of Patent Pooling
A patent pool can be described as an agreement between two or more companies for cross licensing their patents for easier usage of a particular technology. In other words, a patent pool is an agreement where companies permit one another to make use of patents owned by each of them.
Often, technologies involve multiple patents and owners and it is difficult to use them without legal complexities. Moreover, it is not easy to obtain a licence in a hassle-free way to use such technologies. Patent pools can be an effective solution to these problems as they allow licensees to access a package of patent rights.
For manufacturers, patent pools provide a platform where they can get licensing agreements for all related IPs of a technology, allowing for faster production of drugs and research and development. Meanwhile, IP-owning enterprises get to reach a vast number of licensees and get royalties from them.
Definition of Cross Licencing
When two or more companies enter into an agreement to exchange patented knowledge, it’s known as a cross-licencing contract. Such contracts are signed by companies who wish to conduct extensive research and further their technological advancements.
Cross licencing plays an important role in patent transfers because it helps companies to explore research possibilities without any fear of legal conflicts. All the entities involved can achieve their interests in a peaceful quid pro-quo way.
How Patent Pooling and Cross Licencing Helped during the Pandemic?
As per the TRIPS agreement, governments of countries across the world can grant licences to companies during emergencies for the production of a patented product. Amidst the pandemic, the World Health Organisation (WHO) and European Union (EU) spoke in favour of patent pooling and cross licencing for pharmaceutical drugs at the World Health Assembly, held virtually in May 2020.
The Medicine Patent Pool (MPP), a United Nations-backed public health organisation, temporarily expanded its mandate to provide equitable and affordable access to Covid-19 health products for all countries. It is an initiative to encourage pharma companies to provide voluntary licensing to local partners with large-scale production capabilities.
Considering that there was no specific medicine or drug for Covid-19, pharma companies were under tremendous pressure. But, conducting research and coming up with an effective vaccine/drug followed by its dissemination would have required time. Against this backdrop, the idea of a global patent pool was introduced and approved by world leaders. It was thought that a global patent pool would expedite the development of a vaccine.
Example 1: AstraZeneca and Serum Institute
In early 2020 when the Covid-19 pandemic halted people’s lives all over the world, researchers at Oxford University were investigating a vaccine against a different coronavirus which resulted in Middle East Respiratory Syndrome (MERS). They shifted their focus to SARS-CoV-2 in early 2020 and developed a vaccine. Furthermore, they patented the vaccine and cross licenced it to AstraZeneca for selling.
AstraZeneca, in turn, entered into sub-licence agreements with producers across the world for increasing the supply of the vaccine. It signed one such agreement with the Serum Institute of India and as a result, the vaccine was made available in India.
Example 2: Pfizer and BioNTech
Pfizer, a US pharma company and BioNTech, a German biotech firm collaborated and announced the Covid-19 vaccine. The vaccine technology was developed using multiple patents. For example, BioNTech was responsible for supplying the mRNA technology. Moreover, it was created using the spike protein technology, which was reportedly developed by researchers and scientists working at the National Institute of Health (NIH), USA.
Both Pfizer and BioNTech fell into legal trouble because San Diego-based Allele Biotech accused them of patent infringement stating that its patented mNeonGreen fluorescent protein was used to develop the vaccine.
During the pandemic, Pfizer was heavily criticised for not sharing the technology used to develop its Covid-19 vaccine. But, after Pfizer developed its Covid-19 oral antiviral called Paxlovid, it shared the technology with the rest of the world.
Advantages of Patent Pooling and Cross Licencing
The benefits of patent pooling and cross licencing are discussed below:
● Clearance of blocking patents
Patent pooling and cross licencing reduce the chances of companies blocking each other’s patents. Generally, when companies own certain IP assets which are related to one another, they block their patents which prevent innovative research from culminating into a beneficial product.
A patent pool is an ideal solution for clearing blocked patents. Third parties who are interested can collect the required patents from the pool and make further improvements on their products, instead of collecting licences from each patent owner.
● Faster development of medicines
Patent pooling facilitates the sharing of not only the required patents but also competent patents which aid in the development of new medicines. Suppose three pharma companies own IP assets which are not sufficient individually to develop a life-saving drug.
But after the creation of a patent pool, more efficient research can take place due to their combined technical knowledge. It will lead to quicker development of medicines which will contribute to the improvement of global health.
● Increased production capacity
Another important benefit of patent pooling and cross licensing is that it increases the production capacity of all involved parties. By providing large-scale manufacturers access to new technologies, pharma companies can ensure to provide sufficient supply for the market.
The increased production capacity will help these companies to bring the pharma drug to the market much earlier than usual. A good supply against high demand would help more patients access the medicine.
● More affordable healthcare
Patent pooling and cross licensing contribute greatly to making healthcare more affordable. When pool members launch a new product in the market, their competitors lower prices to retain or attract more consumers.
It facilitates healthy competition in the market and keeps prices strictly within the ‘competitive pressure’ zone.
● Reduced costs of litigation
Patent pools greatly reduce the costs of litigations. It helps both IP owners and drug manufacturers stay away from uncertainties caused by legal problems about patent rights. Patent pools help people to avoid legal disputes over patent rights. Elimination of legal disputes regarding patent rights was one of the main objectives behind the formation of patent pools.
Another important benefit is a reduction in transaction costs related to litigation. Entities do not have to get into multiple licensing agreements with various patent holders. One licensing agreement with a single patent pool would be enough.
Limitations of Patent Pooling and Cross Licencing
Patent pooling and cross licensing carry a few disadvantages as well. These are:
● A legal barrier for new members
Suppose existing members of an industry have entered into patent pooling and cross licencing agreements with one another. It may act as a legal barrier for new companies, discouraging them from carrying out innovative research. This can disrupt market competition and lead to the formation of monopolies.
● Reliance on competitors’ technology
An entity may have to rely heavily on another’s technology, skills and abilities for their progress. There have been cases when competitors have filed infringement suits to make the other parties arrive at a cross licensing agreement. This can result in tedious litigations filed by different entities to avoid joining the patent pool.
● Negative effect on competition
A major concern regarding patent pooling and cross licensing is that it discourages competition. It leads to the concentration of technology in the hands of a few. In other words, such agreements may lead to the formation of cartels if they go unregulated.
The Competition Act of 2002 defines a cartel as “an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provisions of services”.
There must be proper regulations in place which would keep a check on the negative effect of patent pooling and cross licencing. Otherwise, its purpose would be defeated.
Where Is the Conflict Regarding Patent Pooling and Cross Licencing in India?
It’s vital to take into account that there are concerns that a patent pool might discourage healthy competition between entities. The absence of competition may lead to quotas, price-fixing and market monopoly. Patent pools entail horizontal agreements which may lead to some companies monopolising the market and preventing new entries.
In India, the Competition Act, of 2002 doesn’t particularly allow IPR licencing agreements as it’s supposed to be anti-competitive. Section 3 of the Act does not encourage agreements which may lead to “appreciable adverse effect on competition” (AECC) within India.
Section 3(5) of the Competition Act offers an exception for IP holders with respect to the exercising of IPRs. It states that “reasonable conditions” which are necessary for IPR protection should not result in anti-competitive agreements. But, one must note that there is no proper definition of “reasonable conditions” in the Competition Act.
According to the booklet released by the Competition Commission of India (CCI), the term means that the unreasonable conditions that accompany an IPR will be subject to Section 3 of the Act.
The CCI identifies patent pooling as an “anti-competitive practice”. Its booklet even states the conditions under which patent pooling will be perceived to be “anti-competitive”. This can include a situation where two or more pharma companies pool their patents and choose not to licence their patents to a third party. Suppose they fix prices and quotas all at the same time.
This can reduce market competition significantly because pool members, usually, receive supra-normal profits and lock the technology which helps to monopolise the market.
Jurisdiction is another issue that has to be taken into account. What happens when the patents are granted under a foreign statute? Section 3(5) of the Competition Act deals with IPRs granted under Indian jurisdiction only. According to experts, Section 3(1) & 3(4) of the Competition Act, 2002 should be used in such situations, to measure AECC.
We must not forget the objectives of the Competition Act, of 2002, which was to promote competition and limit anti-competitive practices. However, patent pooling is gradually becoming popular in India after people witnessed its positive effect during the pandemic. A liberal interpretation of restrictive laws is increasingly paving the way for innovations.
How to Bring About Equilibrium between the Patent Act and the Competition Act?
The points below explore how to achieve equilibrium between patent pools and competition laws:
● Government-regulated patent pools
Creating government-regulated patent pools under the existing legislation will be helpful. It will help to achieve equilibrium between competition laws and patent pools.
● There must be proper guidelines
Proper guidelines must be issued where the details of restrictive practices or anti-competitive conduct of IP holders are clearly defined. It would help IP owners to steer clear of unnecessary litigation. It would also help them exercise their IP rights concerning competition law and policy.
● Expansive meaning of “relevant market”
The definition of “relevant market” as provided by Section 2(r) of the Competition Act, 2002 should include (i) market for goods and services and (ii) technology and innovation. Apart from reducing confusion, it’ll help CCI effectively manage situations where IPs were misused.
● Legislations should promote innovation
Both IP and competition law should be seen as complementary and not contradictory. Both must promote innovation and efficiency and contribute to public welfare.
While access to medicines is a basic necessity for Universal Health Coverage (UHC), high prices can act as an obstacle. Moreover, diseases that mostly affect the poor offer few incentives for profit-seeking pharma companies. Patent pooling and cross licensing address this problem quite effectively. It helps pharma companies develop low-cost medicines for poor people and supply them to developing nations.
Patent pools can face several challenges such as limited diagnostic capacity and constrained health systems, especially with respect to certain cancers. The absence of large international donors for scaling up treatment and introducing new medicines to new markets can be another challenge. But governments across the world are increasingly coming up with policies which make it easier for pharma companies to enter a patent pool and counter these challenges.
Global health sectors and governments have realised the importance of expanded treatment programmes for all kinds of diseases. Affordable medicines developed through patent pools helped to address the need to provide Covid-19 vaccines across the world, which helped to limit its unobstructed spreading.
Thus, public health-oriented patent pooling and cross licensing is a proven strategy which can be explored and employed to stop a global pandemic and address healthcare concerns in developing countries.
Frequently Asked Questions
- What is the benefit of patent pooling?
Patent pooling encourages innovation, faster development of vaccines/medicines and facilitates increased production capacity. It ensures more affordable healthcare.
- Do patent pools encourage innovation?
Patent pools enable firms to combine their patents and collaborate to come up with innovative research. It results in quicker development of vaccines and medicines and more affordable healthcare.
- Are there any limitations to patent pooling?
Patent pooling and cross licensing may lead to competitors using a company’s technology. It may discourage new entrants from carrying out innovative research because the knowledge and technology remain concentrated in the hands of a few.
- What is Medicine Patent Pool?
Medicine Patent Pool (MPP) is a public health organisation backed by United Nations. Its objective is to facilitate quicker development of life-saving medicines and improve their access to low and middle-income countries.
- What is an example of a patent pool?
Medicine Patent Pool (MPP), backed by United Nations, was the first patent pool for public health. It was designed to improve access to affordable medicines in developing countries.
Author: Divya Shekar