Nil: The Value of Patents in a Major Crisis Such as an Influenza Pandemic

I have posted a short draft essay to SSRN that is being published in the Seton Hall Law Review as part of their annual Health Law Symposium. The overall topic of the symposium is Preparing for a Pharmaceutical Response to Pandemic Influenza. My discussion focused on the value of patent law in preparing for a health care crisis. Read the paper on SSRN.

Abstract: This essay focuses on the role of patents in relation to a potential global crisis such as an influenza pandemic or other public health crisis. I argue that patent rights will be largely ignored during an epidemic and that any post-crisis compensation would likely be low when compared to traditional patent rewards or settlements entered under threat of injunctive relief. In some situations, such as use of a patented invention by a state or local government, a patentee may have no recourse. Part III of the essay raises a separate issue that stems from the relatively long time frame for obtaining patent rights as compared with the time frame of an epidemic. Patent rights are only obtained through the typically slow process of patent prosecution. Consequently, innovation triggered by the onset of an epidemic might not be protected by patent rights until well after the crisis has abated. This realization suggests that the role of patents rests with providing incentives for longer-term preparation and follow-up, rather than with protecting innovations triggered by the specific crisis itself. Certain classes of innovations may be left without effective patent protection – such as anti-viral or anti-microbial treatments that are engineered only after isolating the offensive biologic agent. Optimistically, under this same formulation, patents may provide an incentive to ensure that a crisis is never realized. Part V of the essay recognizes that innovation still takes place in the absence of enforceable patent rights. A wide variety of incentives play a role in innovation policy, and reduced patent value will not end innovation.

Notes:

  • I posted some thoughts on this topic in a 2008 Patently-O post. Patently-O readers were helpful in providing guidance and suggestions based on that original post. Thank you!

46 thoughts on “Nil: The Value of Patents in a Major Crisis Such as an Influenza Pandemic

  1. The longest-running patent infringement claim against the Government is Sparton vs. United States, ongoing for 28 years

    Wow.

  2. This paper just covers the easy to find highlights. Before publishing, more research is needed.

    The political history of the Cipro issue needs to be explored in more detail. There was heavy lobbying against using 28 USC 1498 by the big pharma lobby. In the end, through a political compromise, the Government negotiated a discount of about 40% off the previous price of Cipro and backed off on the compulsory license issue. That price was far above actual manufacturing cost, so even with Congress itself threatened by anthrax attacks, the patents involved remained quite valuable.

    The US has taken the position in trade negotiations that other countries must enforce patents on AIDS drugs regardless of epidemic situations in their countries. The history of the TRIPS agreement makes this clear.

    There’s some speculation that non-US parties with US patent claims against the US Government may be in a stronger position than US citizens, as they have certain rights under article 31 of the TRIPS agreement. This should be explored. Any current paper on this subject should also explore the proposed changes to TRIPS in the ACTA agreement.

    On the other hand, DoD uses 28 USC 1498 to preempt patents quite frequently. About six cases a year are filed with the Court of Federal Claims.

    There’s also an administrative claim procedure, which is heavily biased against the claimant. (There’s no hearing, no neutral adjudicator, no requirement that Government action be timely, the Administrative Procedures Act doesn’t apply, and the organization faced with the claim is the one that will have to pay it out of its own budget.)

    The longest-running patent infringement claim against the Government is Sparton vs. United States, ongoing for 28 years. I know of others at 10 and 12 years.

  3. > Almost 1 million people die from heart attacks each year. Is this a “major crisis?” Funny, I don’t hear it referred to as one.

    Then you listen to the wrong people, because many people have pointed out the risks that we’re afraid of are NOT the risks we should be afraid of. I recommend listening to Bruce Schneier and reading some of his books, like ‘Beyond Fear’.

    It seems that others have already pointed out that the study you found doesn’t make the point you want it to, so I won’t make the same points again.

  4. Well, it’s good to hear that Mr. Mooney. I’m glad there are some who agree with the statement that “the law has always placed a higher value upon human safety than upon mere rights in property” which is from Katko v. Briney, 183 N.W.2d 657 (Iowa 1971).

  5. Coriolanus: the city of Rome is without grain due to a strike by the plebeians. Coriolanus wins a war (without their help) and returns with captured supplies. The people want the price of grain to be lowered and most of the supplies simply given to them. Coriolanus argues that the price should not be lowered for a number of reasons, among them that would soon again create shortages. The people react by condemning Coriolanus to death.

    The argument of the OP essentially is the same: that in a crisis we need to lower the price of needed commodity. All that does is create shortages. Any government action that interferes with the market place will create either surpluses or shortages, but since they almost always act to lower prices, they create shortages.

    But the OP is even more vicious. It argues for essentially a royalty-free compulsory license when the commodity is patented. It assumes the patentee will not be able to supply the whole needs or that he is unwilling to license others to produce the commodity. In essence, the OP will strip someone of his patent rights without just compensation. The thinking embodied in the OP is as bad as it gets IMHO. It argues favorably for what our founding fathers thought to be so contrary to civil order as to justify forbidding it in a bill of rights.

    I brought up the story about Coriolanus to illustrate that the impetus to pander to the people and to strip property owners of rights is as old as history. We never ever seem to learn the lessons of history. It is tragic that people such as the author of the OP are as ignorant as they appear to be.

  6. Almost 1 million people die from heart attacks each year. Is this a “major crisis?” Funny, I don’t hear it referred to as one.

    In the 1918 flu pandemic, 500,000 people are estimated to have died over a two year period in the U.S. There are around 300,000,000 people in the U.S. today and there were about 100,000,000 then.

    Even if we normalize for population differences, it hardly seems like anything to get worked up over.

    Sorry

  7. “NameChange” wrote: “Seeing an influenza pandemic as a major crisis is an example of someone”

    ….who’s looked at the history of the year 1918. Wow this blog attracts fools.

  8. I made an earlier post that we need a pro business pro patent decision from the Supreme Court to get some of the investor money off of the sidelines lest we become a backwater nation with no industry, mountains of debt, and a bunch of helpless, dependent sickos.

    This post was deleted. I just don’t get it.

  9. @NameChange

    Your statement is completely unsupported by the science. The study you cite was based on medical reports from the U.S., but mortality rates were similar across the entire world including countries in which there is no evidence that Aspirin was administered. Even the author concludes only that Aspirin overdose may have caused a small number of deaths. Aspirin was by no means the “real culprit” behind the death rate.

    Peer review support for the study has been lukewarm at best:

    Although he doubted that more than a small number of deaths could be attributed to aspirin overdose, Dr. David M. Morens, an epidemiologist with the National Institutes of Health, said the paper was valuable in that “it makes an attempt to look at environmental or host factors that may be involved.” He said, “We haven’t been able to explain all the deaths in young adults with the virus itself.”

  10. Their value, as with the value of any law, depends only on whether the cost of enforcement outweighs the harm prevented. Evidence of that is becoming increasingly scarce in this day and age when novelty means that you use *four* knowledge bases (I mean, it’s not like you can split or combine them) or when a “transformation” under Bilski can be an ordinary part of any physical activity (all of which involve *some* transformation, even if it’s something like the complex biochemical changes that occur when the judge gets a headache reading the patent).

    But I guess I’d have an easier time making that point to people whose job didn’t depend on not understanding that.

    Don’t despair, Moe. There are a lot of us prosecutors out here who agree with you. Not surprisingly, there is a selection bias on the Internets for patent trolls and their sympathizers.

  11. Compulsory licensing is a creature of copyright law and designed for situations where it is impossible to enforce a right of exclusion – such as a public performance on a work of relatively low individual value.

    In my opinion, compulsory licensing has little if any legitimate place in patent law.

  12. “Two Tone Wedding Bands”

    Something Mooney will never have to worry about…

    “Influenza pandemic of 1918…blah blah”

    Chicken Littles love to cite this factoid. However while you were off reading your “history” books, you missed the most important part of the story, that Aspirin is suspected to be the real culprit behind the intensity and lethality of the outbreak

    link to sciencedaily.com

  13. Coriolanus

    History constantly repeating itself. Again again again again again again and again. We never learn.

  14. Since state and federal governments can seize YOU in an epidemic and hold you more or less indefinitely if you are thought to be infectious, it’s not too surprising to think that they can temporarily seize patent rights!

    Compulsory licensing of patents is a not-uncommon feature in countries other than the US, and the usual “grant support” statement in patent applications does say that the government “has certain rights” to the invention.

    Those rights certainly would include emergency use in an epidemic.

    Does this gut the patent system? Hardly. Life is mostly NOT crises, except those pseudo-crises manufactured by people with something to gain. Like Y2K or 2012.

  15. > Seeing an influenza pandemic as a major crisis is an example of someone drinking too much Kool-Aid.

    link to virus.stanford.edu

    “The influenza pandemic of 1918-1919 killed more people than the Great War, known today as World War I (WWI), at somewhere between 20 and 40 million people. It has been cited as the most devastating epidemic in recorded world history. More people died of influenza in a single year than in four-years of the Black Death Bubonic Plague from 1347 to 1351. Known as “Spanish Flu” or “La Grippe” the influenza of 1918-1919 was a global disaster.”

    Please pay more attention in history class next time. Any educated person should have at least heard of that particular pandemic, given that it killed more people than WW1. While modern medicine has avoided a repeat of this disaster, it would be absurd to let our guard down.

    I would find it disturbing if there are really any people who care more about patents than people’s lives.

  16. Patents don’t make sure that anything is anywhere. They merely serve as a legal club one can beat competitors over the head with.

    Their value, as with the value of any law, depends only on whether the cost of enforcement outweighs the harm prevented. Evidence of that is becoming increasingly scarce in this day and age when novelty means that you use *four* knowledge bases (I mean, it’s not like you can split or combine them) or when a “transformation” under Bilski can be an ordinary part of any physical activity (all of which involve *some* transformation, even if it’s something like the complex biochemical changes that occur when the judge gets a headache reading the patent).

    But I guess I’d have an easier time making that point to people whose job didn’t depend on not understanding that.

  17. Your article makes no mention of the technological infrastructure needed to make and test vaccines and the role of patents in making sure that that infrastructure is in place and state of the art in case it is needed in time of crisis.

    Incredibly narrow analysis.

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  19. “When it applies, you have to sue the Government itself for patent infringment damages, in the special federal court for that. [But it does not mean the patent owner cannot recover.]”

    Paul,

    Thanks for completing my thought. I should have mentioned that the private party steps out and the feds step who can be sued only via the Court of Claims. I was in a bit of hurry to get my post in.

  20. Hi Dennis,

    What makes you think so bleak? In a huge country like US, or world at large, management of crisis at the national or world level and safeguarding the legitimate interests of patentees will be a great challenge for everyone involved.

    Imagine a “real” pandemic situation where everyone is effected with the pandemic, as someone rightly mentioned in the comments, the first knee-jerk response will be to save people’s lives. Patentees can be compensated once the crisis is over and everything has calmed down, and back to normal.

    I am sure patentees of such live-saving medicines will agree to that. After all, who wouldn’t? No doubt patents are to generate revenue for the patentee in return for his valuable disclosure of invention but shouldn’t we attach at least some kind of “humanness” to that, especially in the times of crisis. I am every inch for patents, but handing of crisis would call for a slightly “soft approach” to the entire equation.

    Practicing of the long-standing value of patience under the time of crisis by the patentee will certainly compensate them along with the much much valuable goodwill of the people

    We do owe something to the world.

    I also think that placements of adequate guidelines exclusively focusing on the handling of intellectual property by the governments in response to the recent outbreaks of anthrax, SARS, H1N1 and other natural emergencies should be on the way. I think that that will alleviate a lot of fears concerning the handling of intellectual property during crisis.

    Further, I also think that the risks attached to the handling of intellectual property during crisis should be meticulously included in all the transaction documents so that when a real situation arises unwanted surprises can be avoided. It is a matter of planning for that unseen future.

  21. 6: Is Lew AI?

    A search of the USPTO database for inventors named “Lew” or “Lewis Weinstein” didn’t come up with any hits, which is perfectly consistent with 6’s theory.

  22. Re: “..contractor immunity of 28 USC 1498.”
    When it applies, you have to sue the Government itself for patent infringment damages, in the special federal court for that. [But it does not mean the patent owner cannot recover.]
    Also when it applies you cannot get an injunction. But under the Sup. Ct. eBay decision that would be highly unlikely anyway in the case of a public health emergency need for more than one suppier. And probably oacademic, since few patent owners would risk the bad PR and the wrath of Congress in refusing to license another supplier.

    Is not the assumption here that the patent application process would necessarily take longer than the [slow] drug safety & effectiveness approval process dubious? Especially with the availablity of fast-tracking applications by petition under the recent new rule?

  23. posted above … “Nope. It was Bruce Ivins, a named inventor on a patent for anthrax vaccines that issued shortly after the 9/11 attacks.”

    I’m afraid not. The FBI has utterly failed to demonstrate any convincing case against Dr. Ivins. I am the author of CASE CLOSED, a novel which answers the question … Why did the FBI fail to solve the 2001 anthrax case? And I also have a blog where people who are concerned with this case come to express their views. (see url below)

  24. As a practical matter, when a crisis or potential crisis is identified by an inventor/company, the “subtleties” in the above essay are completely ignored.

    If there are any remotely relevant applications about to be filed that can be amended by dropping “SARS”, “H5N1″ or any other virus du jour into the mix, that will happen because “that’s what the investors want to see.”

    Unless I’ve missed something, we still have not seen the government exercising its “march-in rights” under Bayh-Dole.

  25. So the patent model may not work particularly well in a crisis? So what? Only the most dogmatic defenders of the patent system believe that the patent “hammer” is the solution for every problem “nail”. The whole world does not have to adjust itself to accommodate the career plans of a small number of American lawyers.

  26. Whether it will be efficacious or not, the government has planned ahead for a potential H5N1 pandemic (and if namechange doesn’t think a pandemic flu which kills 60% of infected people would be a crisis, then I misunderstand the word crisis).

    see link to redorbit.com

    The government recently (in 2005) awarded a $100 million contract to Sanofi-Aventis SA for an undisclosed number of vaccines that target the current strain circulating, called H5N1. But there are about 16 strains of bird flu, and the government wants Gaithersburg-based MedImmune to create vaccines for each.

    “We are trying to prepare for the other potential strains that might take over our attention,” said Kathleen Coelingh, MedImmune’s senior director of scientific affairs. “We want to have a library against the various forms, so we can pull them off the shelf in the future.”

  27. What about somebody terrorizing the country by mailing anthrax? Remember that? For a while back in 2001, anthrax attacks certainly appeared to be a “major crisis.”

    It was a crisis that was very much exploited by the ruling administration at the time to keep the public crapping their pants as much as possible. A sighting of a “mysterious powder” or even a “mysterious liquid” in a public place became an excuse for hysterics. Call the HazMat squad!

    And then for years afterward there was silence about the perpetrator(s) of the attacks whlie we went about killing Iraqis who, it turned out, had nothing to do with the anthrax.

    But who did? It wasn’t Steven Hatfill, who walked away with $5.8 million after being wrongly tagged by Ashcroft, Gonzales and the other notoriously inept clowns in the Bush Administration.

    Nope. It was Bruce Ivins, a named inventor on a patent for anthrax vaccines that issued shortly after the 9/11 attacks.

  28. You’ll never have a million chinese troops come over to attack us. They’d be met by 10 million fully armed hillbillies (myself included) immediately, and I don’t think they want a piece of that.

  29. Influenza pandemic a “Major Crisis” ?????

    A meteor hitting Washington DC, or 1,000,000 Chinese troops landing on American shores are examples of a major crisis.

    Seeing an influenza pandemic as a major crisis is an example of someone drinking too much Kool-Aid.

    Incidentally, using “preparing” and “crisis” in the same sentence is oxymoronic and is typical of the kind of thinking that goes along with “never let a good crisis go to waste”

    All of that aside, if people are “preparing for a crisis” then patentees can start early and prepare for widespread infringement by establishing license programs early. A government cannot simply go out and start making something. And they prefer COTS purchases especially for unexpected situations.

    Sounds like the author is arguing against strong patent rights, particularly with the Part V thesis. No surprise there. Mooney would be proud.

  30. Dennis,

    Very interesting article.

    I see you mention the 28 USC 1498 issue in your article. Depending on how much encouragement the feds give to making vaccines, as well as other anti‐viral or anti‐microbial treatments available to the general public, the provider of such in a “pandemic” may get the “contractor immunity” of 28 USC 1498. Witness the Federal Circuit and subsequent district court rulings in Madey v. Duke University.

    Regarding the states, the patent owner is in an even more difficult spot. You’re correct that patent infringement Ex parte Young actions haven’t faired well (see Pennington Seed v Produce Exchange), mainly because it’s difficult to identify the state correct official to enjoin. And trying to pursue a patent “takings” claim against a state (or multiple states0 based on state equivalents of the 5th Amendment is truly “new territory.”

  31. Guess patents are a suckers game, then.

    Before: “Here, company Y, go to all the trouble and expense of developing a vaccine because you can patent it and make your money back.”

    Then: “Hey, we’ve got a real need here. We can’t be limited by your patents. By the way, thanks for taking all that trouble and expense to develop the vaccine. Why did you bother again? Oh yeah . . . .”

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