[Ip-health] Video (and transcript) about Senator Bernie Sanders proposal to expand Veterans access to patented medical inventions

Jamie Love james.love at keionline.org
Mon Sep 21 08:18:49 PDT 2015


Senator Bernie Sanders proposal to expand Veterans access to patented
medical inventions

19. September 2015

This is a video by Zack Struver about Senator Bernie Sander's proposal to
expand Veterans access to patented medical inventions [2]. The video
discusses both the proposal by Senator Sanders to give the U.S. Department
of Veterans Affairs the authority to use compulsory licenses on patents on
medical inventions, including drugs, and the history of "government use"
provisions in current U.S. statutes, including 28 U.S.C. 1498, which
Sanders proposes modifying.


Below is the transcript from the video, with citations.

On May 12, 2015, as a result of the Department of Veterans Affairs’
inability to afford hepatitis C (HCV) treatments that have a retail price
of up to $95,000, Senator Bernie Sanders asked the VA [3] to use government
use provisions in U.S. patent law to import affordable generic versions of
sofosbuvir and other HCV drugs. The Department declined, on the grounds
that the statute created too much uncertainty over the amount of
compensation that would be due to patent holders.

At a meeting of the Senate Committee on Veterans Affairs on July 22, 2015,
Senator Sanders introduced an amendment [2] that would allow the VA to set
a “reasonable and affordable royalty” as compensation for the use of
patented medical technologies, including drugs. The amendment would
effectively create a compulsory licensing mechanism for the VA that would
account for the VA’s limited budget, the research and development costs of
the patent holder, and the health outcomes of the patented invention.

When Sanders introduced the bill, some members of the committee questioned
the constitutionality of the proposal to limit compensation for patent
holders. As the legislative history of government use in the United States
shows, however, Congress has great latitude in determining remedies on the
government use of patents.

The Federal government has the right to use patented inventions without
permission from patent holders, subject to payment of reasonable
compensation. The primary statute governing such use, 28 U.S.C. section
1498, titled “Patent and copyright cases,” was codified in 1949 and has
been amended since then.

The origins of section 1498 date back to a series of Supreme Court rulings
in the 19th century related to various inventions, including patented
military technologies and stamps. The Supreme Court ruled that since
Congress had granted the Court of Claims jurisdiction over contractual
disputes and constitutional violations, they could only hear patent cases
in which the government had failed to comply with express or implied
contracts. U.S. v. Burns, 79 U.S. 246 (1870) [4] (held that U.S. must honor
contract for use of patent entered into on its behalf by a military
officer); James v. Campbell, 104 U.S. 356 (1881) [5] (held that patent
holders have a right to compensation for government use, but it must be
provided for in statute); U.S. v. Palmer, 128 U.S. 262 (1894) [6] (held
that Court of Claims has jurisdiction to hear contractual disputes over
government use of patents).

These rulings did not, however, deal with a critical question about the
jurisdiction of Federal courts: can a patent holder sue the federal
government for patent infringement?

In Schillinger v. U.S., 155 U.S. 163 (1894) [7], the Supreme Court
conclusively answered no. They decided that the Court of Claims had no
jurisdiction to hear patent infringement cases against the Federal
government, unless Congress consented to waiving the government’s sovereign
immunity from litigation.

During famed landscape architect Frederick Law Olmsted’s 1875 renovation of
the Capitol grounds, the U.S. government entered into a contract with an
outside construction company for the laying of concrete. The contractor,
who received 28 ½ cents per square foot of pavement, used John J.
Schillinger’s patented method (US105599 A) for the pouring of “concrete
pavement laid in detached blocks or sections,” which involved the
“arrangement of tar paper, or its equivalent, between adjoining blocks of
concrete.” Schillinger, who had previously protested to the Office of the
Architect of the Capitol that only an authorized licensee should be awarded
the contract, sued the United States government for the “wrongful
infringement” of his patent.

After almost twenty years spent fighting in courts and in Congress, the
Supreme Court ruled against Schillinger in 1894. Justice David J. Brewer
issued the opinion of the Court, noting that patent infringement suits
amounted to tort claims, and that Congress had not waived sovereign
immunity for tort damages. Additionally, the Court ruled that Schillinger
had no constitutional basis for his claims, as Congress did not allow the
courts jurisdiction to hear tort claims for the “taking” of property under
the Fifth Amendment.

Reporting on the Schillinger case, The New York Times proclaimed in its
headline that “Government Can Do No Wrong” (Nov. 21, 1894).

The Supreme Court affirmed the principle of sovereign immunity for patent
suits in 1901 in Russell v. U.S., where the Court explained that, "it is
the prerogative of a sovereign not to be sued at all without its consent or
upon such causes of action as it chooses. It has not chosen to be sued in
an action sounding in tort." Russell v. U.S., 182 U.S. 516, 535 (1901) [8].

In 1907, Congress reacted to what they viewed as a flawed legal framework
for dealing with patent infringement suits against the government. Senator
Philander C. Knox led the charge. Knox, a former Attorney General under
William McKinley and Teddy Roosevelt, and Counsel for Carnegie Steel, had
the perspective of working for both the government and an industry that
relied on strong intellectual property protections.

Knox proposed that Congress create remedies for patent infringement by the
Federal government. Rather than shifting power solely into the hands of
patent owners, however, Knox called for a balanced approach. “It seems
necessary and proper to provide for patentees a remedy for the invasion of
their rights,” Knox wrote in the Senate report on his legislation, “while
making all necessary provision for the protection of the interests of the

Congress passed Knox’s proposed legislation in 1910, for the first time
granting the courts jurisdiction to hear tort claims against the Federal
government. The act, titled “An Act to provide additional protection for
owners of patents of the United States, and for other purposes,” provided
“reasonable compensation” for the use of patented inventions “by the United
States without license of the patent owner thereof or lawful right to use
the same.” 36 Stat. 851, chap. 423.

The act was amended in 1918, after a young Acting Secretary of the Navy,
Franklin D. Roosevelt, sent a letter to Congress asking them to reverse a
Supreme Court decision from that year that held that the 1910 legislation
did not shield government contractors from litigation. Roosevelt reasoned
that such a legal landscape would open contractors up to expensive
litigation, and harm national defense and the public interest. The revised
statute expanded the earlier legislation, which waived sovereign immunity
for use of patented inventions “by” the federal government, to include use
“by or for” the federal government. 40 Stat. 705.

The government use provisions have been amended since 1918, most
significantly to extend limitations on remedies for the government use of
copyrighted materials and plant varieties. Pub. L 87-726 (1960), 28 U.S.C
1498(b); Pub. L. 91-577 (1970), 28 U.S.C. 1498(d). See here [9] for the
full legislative history of 28 U.S.C. 1498.

Other areas of U.S. law use the Constitutional authority to limit remedies
for patent infringement, when the government has an interest in doing so.
For example, government nuclear power plants and the Tennessee Valley
Authority can be sued only for reasonable compensation when they infringe
energy patents. There are also different rules for use by and for state
institutions. 16 U.S.C. 831r (Tennessee Valley Authority); 42 U.S.C. 2184
(nuclear technologies). See here [10] for more areas of U.S. law with
limitations on remedies.

Senator Sanders wants to use the flexibility in our Constitution to empower
the Secretary of Veterans Affairs to break patent monopolies if a price is
"excessive or a barrier to care."

Specifically, the Secretary would consider if:

"(1) the price of the technology is the primary factor prohibiting the
Secretary from being able to provide access to the technology to all
veterans for whom the technology is considered clinically appropriate; and

(2) there is no comparable and equally efficacious technology available to
the Department at a reasonable and affordable price."

The Department of Veterans Affairs, using the Secretary’s determination,
would be allowed to buy less expensive generics and pay only a “reasonable
and affordable royalty” as compensation.

That royalty would take into account “the impact of paying the royalty on
the [health care] budget of the Department,” and “The extent to which the
owner of the patented invention has recovered or is expected to recover …
[its] research and development costs” through sales to patients outside of
the V.A.

The proposal by Senator Sanders would ensure that high prices do not create
a barrier to access, and it would put patent monopolies at risk, rather
than patients. It would also create a realistic system of compensation for
patent holders, based on the limited budget for Veterans’ health care.

The history of our law on government use for patented inventions is

Until 1910, an 1894 Supreme Court ruling held that patent holders could not
sue the federal government for patent infringement. Their right to do so
was granted by Congress, and then only in a limited way. For example,
patent holders cannot get an injunction to prevent the federal government
from infringing patents.

However, the law passed in 1910 was not designed to deal with the issue of
excessive pricing of drugs.

The Sanders proposal does not eliminate patent holders rights in
infringement cases involving the federal government, but it does put
veterans in a better position.

The VA would be able to reject patent monopolies when prices are too high
and make compensation to patent holders affordable.

Congress has a choice: it can allow the V.A. to continue rationing care and
slashing funding for other essential health care programs for veterans, or
it can use its constitutional authority to put veterans first.

Source URL: http://keionline.org/node/2324
[2] http://keionline.org/node/2290
[3] http://keionline.org/node/2230
[4] https://supreme.justia.com/cases/federal/us/79/246/case.html
[5] https://supreme.justia.com/cases/federal/us/104/356/case.html
[6] https://supreme.justia.com/cases/federal/us/128/262/case.html
[7] https://supreme.justia.com/cases/federal/us/155/163/case.html
[8] https://supreme.justia.com/cases/federal/us/182/516/case.html
[10] http://keionline.org/node/953

James Love.  Knowledge Ecology International
KEI DC tel: +1.202.332.2670, US Mobile: +1.202.361.3040, Geneva Mobile:
+41.76.413.6584, twitter.com/jamie_love

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