Ecuador’s Compulsory Licensing of Pharmaceutical Patent Rights

Under the TRIPS agreement member Nations can force compulsory patent licenses at their discretion. The 2001 Doha declaration clarifies this point: “Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.”pic-76.jpg

In October 2009, Ecuador’s president issued a decree that allows its Ministry of Public Health to issue compulsory licenses based on public interests such as access and costs. According to IP Watch, the government is now “working on a mechanism for issuing those licenses” on a case-by-case basis. [Link]

Spinning this decision, Access-to-Medicines advocate Peter Maybarduk indicated that the US is the world leader in compulsory licensing:

Many countries have used compulsory licenses to promote public interests and remedy anti-competitive practices in a variety of sectors. Today, the United States is perhaps the most frequent user of compulsory licensing; including the government use of defense technologies, and judicially-issued licenses to remedy anti-competitive practices in information technology and biotechnology, among others. Canada routinely issued compulsory licenses during the 1960s and 70s to develop its national pharmaceutical industry. In recent years, a number of countries have issued compulsory licenses to improve access to medicines, including Thailand, Malaysia, Eritrea, Mozambique and Indonesia, among others.

In 2007, Brazil issued a compulsory license for the HIV/AIDS medicine efavirenz. Brazil has provided treatment to hundreds of thousands of people living with HIV/AIDS and saved well over US$1 billion through its combined medicines strategy of domestic production, importation, negotiation and compulsory licensing. [Link]

Major pharmaceutical companies have reportedly agreed to work with the government in collecting royalty payments. [Link] The same report indicates that Ecuador plans to obtain drugs both through local manufacture and imports. Prior to TRIPS, more than four-dozen countries categorically refused to grant patent rights on pharmaceuticals.

24 thoughts on “Ecuador’s Compulsory Licensing of Pharmaceutical Patent Rights

  1. “The idea that the U.S. government is a “frequent user of compulsory licensing” is misleading and flat out wrong.”

    That statement is incorrect. I sent in a FOIA request to the Army and Navy to find all administrative claims for patent infringement made under 28 USC 1498. The Army has responded; the Navy, not yet. The Army lists about 25 claims in this decade. Government-wide, about six claims a year make it to the Court of Federal Claims.

    If the technology was developed with Government funds, that’s a different deal. The Government then already has a license. (See the Bayh-Dole Act.)

  2. “I take it then that you would support a statutory reversal of eBay.”

    And I don’t think I would be alone in saying a resounding YES.

  3. Tim, I think that statement had more to do with American politics that it did with the policy statement. The statement was made in Oct. 2008 just when it appeared that Obama was going to be elected.

  4. The drug manufacturers of the developed world have understood that their IP rights cannot be perceived as denying life-saving medicines to poor people.

    “‘We accept the democratic decision… to legally implement this extraordinary measure,’ the 14 companies including European and American giants such as Bayer and GSK said through the local pharmaceutical industry association on Wednesday.

    “‘No legal right is superior to the requirements of public health, especially in such serious circumstances,’ the association statement added.”

    link to google.com

  5. Posted by: NameChange | Nov 24, 2009 at 11:03 AM “Its time to cleanse the patent lexicon of the term “compulsory license” since it is directly opposed to the right to exclude, which is the only meaningful right in patent law.”

    I take it then that you would support a statutory reversal of eBay.

  6. Compulsory licensing might be a solution to the BCRA gene lawsuit (Myriad). The patents are valid, but are put by the government under compulsory licensing to any doctor who wants to advise patients, for a nominal fee.

  7. Hey I’ve got a great idea, let’s model our patent system, the greatest in the world, after Ecuador. We can have compulsory licenses galore. The government can take over all the factories and make everything. The government can meet all of our needs. We can all stop wearing shoes too…

  8. The use of the word “compulsory license” in the patent world is dangerous and backward. Compulsory licenses typically arise when search costs associated with determining ownership of the right and costs of negotiating licenses exceed the value of the infringing act, e.g. a public performance of a copyrighted work, that, further, has typically already occurred.

    Infringers like the idea of compulsory licenses because it sounds like justification for killing the exclusive right. But the exclusive right is still alive and well. In contrast to copyrights, the value of an individual act of infringement is relatively large (for a mass produced product, huge) Search costs for identifying owndership of the right are not a problem in patents, you don’t hear about infringers trying to identify a patentee. Typically, the patentee is easily identified and is the one who actively seeks to extract a royalty or enforce the exclusive right on the infringer.

    Its time to cleanse the patent lexicon of the term “compulsory license” since it is directly opposed to the right to exclude, which is the only meaningful right in patent law.

  9. “You can’t run a patent system or country by exploiting paranoia.”

    actually, i thought that exploiting paranoia was a requirement

  10. The idea that the U.S. government is a “frequent user of compulsory licensing” is misleading and flat out wrong. Heck, possibly even anti-patent propaganda.

    The U.S. government’s use of defense technology more often than not is linked directly to the contracts under which the technology is developed. Further, any grant money that is let in connections with SBIR projects also has contractual strings that grant the U.S. government licensing rights to the developed technology. That is why smart defense contractors who see an opportunity for some cool technology that they can sell to the government and others “off the shelf” use IR&D money to develop those technologies.

    Thus, any extensive use by the U.S. government of patented technology arises from legitimate pre-existing contractual rights.

  11. While I am not sure, the drug companies require a certain amount of revenue to justify the expense and risk in researching new drugs. This probably means that to the extent that prices are lowered to countries such as Ecuador, they are raised here.

    There is no free lunch.

  12. I think the opening post references to US compulsory licensing were in reference to consent deals settling antitrust cases with the likes of the Wright brothers, IBM, AT&T and Xerox. These companies were obligated to license their patents to all comers at a reasonable rate.

    However, from my point of view, they equally could be referring (but I’m sure they are not) to the fallout of the eBay decision where compulsory licensing occurs in about 30% of the cases.

  13. Kinda depends on your definition of compulsory licensing. But I don’t think it is controversial to suggest that 28 USC 1498 authorizes compulsory licenses for word done for the government.

  14. Appeal to Probability

    My understanding is that the issue is not so much that the patentee refuses to license but that the patentee’s list price is too high. The compulsory license (or its threat) provides the govt. with leverage to force the patentee to lower its cost to something that is affordable given the economic circumstances of a particular country.

    The article cites a real life example in which GSK dropped the cost of a drug from $350 to $60 in response to just a request for a compulsory license. So the benefit to a particular country’s people is far from speculative.

  15. I agree with Patent_Medicine; what on earth is Mr. Maybarduk talking about? I thought there had been no compulsory licensing in the U.S., although it was threatened for Cipro (or did it actually happen for Cipro? I can’t remember–either way, I thought that was the only example).

  16. No one has yet to find a real life situation where an inventor discovered and patented a product/process but refused to either license or manufacture it under all circumstances. That goes against common sense and is just plain silly.

    Ecuador, Maybarduk, and JAOI assume that because something could happen, it is inevitable that it will happen. You can’t run a patent system or country by exploiting paranoia.

  17. “Today, the United States is perhaps the most frequent user of compulsory licensing; including the government use of defense technologies, and judicially-issued licenses to remedy anti-competitive practices in information technology and biotechnology, among others.”

    Huh? Is he referring to injunctions? I don’t understand.

  18. As I mentioned more than once, there are Constitutionally expressed exceptions to “the exclusive Right,” and these exceptions seem to be consistent with the compulsory licensing discussed.

    The Framers give Congress the means and the Power UP FRONT to regulate the “exclusive Right.” By including in Clause 8, “securing for limited Times,” Congress can pass patent statutes that grant more or less time to a patent, and, by statute, Congress has done so. And, also by statute, Congress has the Power to create different types of patents with different lifetimes, as they have done for Design Patents. Congress has also created Trademark statutes that live somewhere between Copyrights and Design patents.

    Thus, Congress has absolute Constitutional Power to administer our patent system, and it has rightly done so. Further, within the Constitution itself, one finds authority for Congress to exercise its Power to moderate “the exclusive Right” under certain constitutionally certified circumstances:

    (A) To regulate Commerce,
    (B) provide for the common defense, and to
    (C) promote the general Welfare.

    J Article I, §8, Clause 3:
    “The Congress shall have Power … To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;”
    Thus, in its body of antitrust statutes, Congress imposes certain limits when exercising a patent’s “exclusive Rights” in order to regulate Commerce.

    J The Preamble:
    “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

    Eminent domain power, when exercised over a patent’s “exclusive Rights,” for national security and defense, is absolutely consistent with the Preamble, i.e., to “provide for the common defence.” Thus, military appropriations bills in peacetime and wartime routinely include allocations for patent royalties.

    If an independent inventor discovered and patented a vaccine for Anthrax, but refused to license or manufacture it for his anti-American religious reasons, eminent domain could absolutely and reasonably be asserted to “promote the general Welfare.”

    Posted by: Just an ordinary inventor(TM) | Nov 18, 2009 at 01:38 PM

Comments are closed.