Feature Note / Legal Publications, Newsletter

Myths and realities regarding compulsory licenses

covid-19 , patents
24 April, 2020

Compulsory licenses are a good mechanism in case the patent owner should refuse to produce a necessary quantity or place an unjustified price on a product in an emergency situation. The current scenario provides a good opportunity to review this measure and establish a fair balance between the legitimate interests of patent holders and consumers.

Santiago Ortúzar

Partner Alessandri

 

Legitimate concern has arisen regarding how to ensure that the vaccine against the coronavirus, once discovered, is available to everyone. Although Chile has first-rate scientists and researchers, there seems to be the conviction that it will be the great foreign laboratories that will take the victory, finding the solution that will leave this pandemic and its effects in the past.

With 127 votes in favor, the Chamber of Deputies has instructed the Ministry of Health to issue compulsory licenses to any tests, vaccines, drugs, and any means of prevention, surveillance, diagnosis and prevention of the coronavirus, under the protection of industrial property law.

When invoking industrial property law, our politician’s only concerns in this case could be the existence of patents of invention on the active ingredients in the chemical solution that will fight this virus. Apparently, the existence of one or more patents could carry two serious threats: the lack of availability of the vaccine should reproduction be prohibited to those who do not have the proper authorization from the patent owner; and the price, which presumably may be excessive and would be an element of exclusion for a large part of the population.

Compulsory licenses are currently within the existing legal limits. Although their definition is not found within the law, they could be understood as permits imposed on the owner of a patent so that another may use it. The same law establishes the grounds under which a compulsory license can be imposed, among which we can cite number 2, as it is the most relevant to the present case: “When for reasons of public health, national security, non-commercial public use or of national emergency or other of extreme urgency declared by the competent authority, the granting of said licenses is justified.”

So far, everything seems to coincide with the Chamber’s request, except that none of the events that call for a compulsory license have occurred.

Notwithstanding the foregoing, a compulsory license is not an expropriation. The patent is not taken from the owner, but rather obligates the owner to grant a license, with the licensee carrying out a respective periodic payment to the patent owner, for a specified period.

There is no doubt that compulsory licenses are a good mechanism in the event of a national health emergency such as the one we are experiencing, should the owner of the patent that contains the solution refuse to produce in the necessary quantity, or define an unjustified price. However, it is a mechanism that requires greater precision, especially in the definition of the amount to be paid as well as its own mechanism to determine its origin. The current circumstances are a good opportunity to review this tool, better define its enforcement mechanism, and strike a fair balance between the legitimate interests of patent holders and consumers.

This article was originally published in Diario Financiero on April 17, 2020 (spanish only)

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