[Ip-health] KEI testimony at March 8, 2018 USTR Special 301 hearing, focusing on US compulsory licensing of patents

Kim Treanor kim.treanor at keionline.org
Thu Mar 8 12:44:05 PST 2018


KEI testimony at March 8, 2018 USTR Special 301 hearing, focusing on US
compulsory licensing of patents
James Love on 8 March 2018

On March 8, 2018, USTR and the interagency committee on the Special 301
held a hearing. KEI was one of the groups testifying. More on this process
here: https://keionline.org/ustr/special301

I began our oral testimony discussing President Trump’s promise, during the
election, to negotiate lower prices on drugs for Medicare, noting that many
of the comments by PhRMA and other drug company lobby groups would create
norms that would make it impossible for President Trump to deliver on even
a small fraction of his promised savings.

I then read the following comments about compulsory licensing.

Compulsory licensing

PhRMA and other groups lobbying on behalf of big drug companies frequently
target the use of compulsory licensing as a “harmful IP-related trade

KEI sees compulsory licenses as an important and underutilized tool to
address excessive pricing and restrictive licensing practices.

I would like to take a minute to provide some context for this proceeding.

First, the United States has at least 15 separate statutes that are used to
permit non-voluntary use of patents, not counting our various exceptions to
patent rights for research or uses by medical professionals.

Second, the United States is by far, and I mean by far, the most frequent
user of compulsory licenses. USTR itself overturned an injunction on the
importation of iPhones and iPads that infringed on patents owned by
Samsung, on August 3, 2013.[1]

Under the Supreme Court eBay Doctrine regarding the enforcement on
injunctions, courts routinely permit infringement of patents, when
royalties are paid to the patent holder. For another example involving
Apple: in 2017, Apple successfully asked a judge for permission to use,
without a voluntary license but subject to an ongoing royalty, U.S. Patent
No. 5,781,752, titled “Table based data speculation circuit for parallel
processing computer.[2]

The compulsory licenses under the eBay doctrine are fairly common, about
one a month for a while, but now less frequent as parties tend to grant
voluntary licenses, when it is perceived to be hard to enforce an
injunction, and they cover a wide range of technologies.

In the area of medical technologies, the most common compulsory licenses
ordered by the courts are for medical devices and diagnostics, of which
there are many, on everything from contact lenses to artificial heart
valves to diagnostic technologies. Often the companies requesting such
compulsory license are innovators themselves.

For example, in 2008, Abbott used the eBay doctrine to obtain a license to
HCV Genotyping testing patents. Similar compulsory licensing efforts were
successful in several high income countries, including Germany, where Roche
was requesting the compulsory license, and in Australia and the UK, to
mention a few other countries.

The United States has also used the threat of compulsory licensing to force
more liberal licensing or price discounts, in cases where the federal
government was a funder of research, including the patents on reverse
genetics needed to manufacture vaccines and Avian flu, the stem cell
patents held by WARF, the Abbott patents on ritonavir, and the Fabry
patents now held by Sanofi, to mention a few cases under the Bayh-Dole Act.
In 2016, 51 members of Congress asked the federal government to make more
frequent use of this Act.[3]

Recently 18 members of Congress asked the federal government to use 28 USC
1498 to grant compulsory licenses on patents on HCV drugs, and the Senate
Armed Services Committee in 2017 adopted a directive to the Department of
Defense to use compulsory licenses when prices on Army-funded drugs like
Xtandi are more expensive in the United States than in other high income

Many persons, including President Trump, have called for changes in the law
to allow Medicare to negotiate drug prices. If Medicare negotiates drug
prices, it will involve a threat, by the United States, to withhold
reimbursement, narrow formularies or increase co-payments. All of these
measures hurt patients. We want the Congress to give the government more
robust authority to use compulsory licensing, in order to protect patients,
effectively putting the monopoly at risk rather than the patient, when
there are disputes over prices.

KEI and others are planning to asking the Trump administration to use,
under existing statutes, either or both 35 USC 203 and/or 28 USC 1498, to
end monopolies, on at least three drugs, this calendar year. In every case
there are very significant abuses of patent rights, and negative
consequences for patients.

Finally, we want to call attention to the growing patent thickets for two
new important technologies, CRISPR and CAR T. If we don’t have to ability
to use compulsory licenses to force more liberal licensing of technologies,
it will harm innovation and make us defenseless from abusive pricing.

[1] Michael Froman’s decision in the Apple/Samsung ITC patent dispute and
the USTR trade agenda, August 6, 2013, https://www.keionline.org/22282.

[2] Wisconsin Alumni Research Foundation v. Apple, Inc., Case:
3:14-cv-00062-wmc, (W.D. Wis., June 6, 2017).

[3] 2016: 51 members of Congress have asked the NIH to use March-In rights
to rein in high drug prices, January 11, 2016.

Annex. US statutes that are used for compulsory licensing (non-voluntary
use) of patents.
35 U.S.C. 203 – MARCH-IN RIGHTS (Bayh-Dole Act)
35 U.S.C. 271(e)(6)(B) – INFRINGEMENT OF PATENT (biologic products where
patents are not timely disclosed)
35 U.S.C. 283 – INJUNCTION (under eBay doctrine)

28 USC 1498 – Patent and copyright cases (use by or for government)

30 U.S.C. 937 – CONTRACTS AND GRANTS (Black Lung disease)

42 USC Sec 2183 – Nonmilitary utilization (patents on atomic energy)
42 U.S.C. 7608 – MANDATORY LICENSING (Clean Air Act)

International Trade Commission)

Sherman Antitrust Act, 15 USC 1-7
15 U.S. Code § 1 – Trusts, etc., in restraint of trade illegal; penalty
15 U.S. Code § 2 – Monopolizing trade a felony; penalty

Wilson Tariff Act, 15 USC 8-11
15 U.S. Code § 8 – Trusts in restraint of import trade illegal; penalty

Clayton Act, 15 USC 12-27

COMMISSION (Federal Trade Commission)

Kim Treanor
Knowledge Ecology International
kim.treanor at keionline.org
tel.: +1.202.332.2670 <(202)%20332-2670>

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