Patent pools: should pharma share IP with the developing world?

The call for the creation of patent pools comes from governments of developing countries and non-governmental organisations (NGOs), and has been championed by the US NGO Knowledge Economy International (KEI), based in Washington DC. KEI claims that countries including France, India, Thailand, the Netherlands and Brazil have indicated they are in favour of pooling.

Inevitably, such a move is not favoured by the industry, which launched a pre-emptive strike at the end of last week in the form of a progress report on pharmaceutical company projects to develop new medicines and vaccines for ten diseases of the developing world that have been prioritised by WHO and the United Nations.

In its submission KEI says the collective management of intellectual property rights can help the intergovernmental working group achieve its goals. By pooling patent assets it is possible to overcome market inefficiencies, lower transaction costs, and make it easier to access multiple rights. Such arrangements can be made voluntarily or non-voluntarily, notes KEI.

Precedents for pooling

But patent pools are not just a heavy-handed way of knocking heads together to achieve policy objectives. One of the key motives behind voluntary pooling is to clear blocking patents that would be infringed when practising other patents. It also vastly simplifies the whole process of intellectual property management, leading to a reduction of licensing transactions, making it easier to deal with multiple owners and handle the payment and collection of royalties.

The idea of pooling patents has plenty of precedents, dating from industrial age sectors such as sewing machine and aircraft manufacturing. More recently, it has been used to bring together intellectual property in the creation of international technology standards including DVD and MPEG.  

Pools can involve simple cross-licensing among two or more competitors, to share a handful of patents needed for a particular product, or they may involve an industry-wide pool encompassing hundreds of manufacturers and thousands of patents.

KEI notes that there are precedents for government intervention to create a pool, citing  the US Manufacturers’ Aircraft Association pool, formed in 1917 against the backdrop of legislation threatening compulsory license of patents to overcome barriers to the scale up of aircraft manufacturing, as the US prepared to enter the second world war.

The US government also insisted that rights to license patents for radio technologies should be consolidated to foster development of the radio industry.

Now KEI and others want to promote the use of patent pools with the specific objective of increasing the level of generic competition to branded medicines.

Lower prices, greater innovation

Providing much more efficient and effective mechanisms for the voluntary or compulsory licensing of patents will lower prices and promote innovation. “The multitude of patents, potential claims of infringement, variance of national laws, complexity of international treaties and national patent laws, and complicated rules for the export of medical technologies under compulsory licenses present barriers for the expanded use of generic medicines,” KEI says in its submission to the WHO.

Ahead of the meeting the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) published a progress report on industry R&D projects for diseases of the developing world, in attempt to demonstrate that current measures to foster the development of suitable medicines are bearing fruit.

The figures show member companies are working on 50 treatments compared with 43 at the end of 2006. At the same time, the number of ongoing IFPMA company vaccine projects to address developing world diseases has grown from six to eight.

The combination of the industry-based model and public-private product development partnerships is increasing R&D in this field, said Harvey Bale, Director General of the IFPMA, saying “The R&D pharmaceutical industry encourages [intergovernmental working group] participants to support positive proposals that would reinforce this important trend.”

Bayle added that the number of candidate products in development for tuberculosis, the leading cause of mortality in the developing world, has increased to 22, of which six are in phase II or phase III clinical trials.

IFPMA, whose members include 25 leading international companies and 46 national and regional industry associations, has proposed a “transferable market exclusivity” model under which a company would be granted patent extension for products marketed in developed countries, in exchange for doing R&D on neglected diseases, to improve the supply of medicines.

It would not be unprecedented for WHO to get involved in moves to form patent pools. Following the outbreak of severe acute respiratory disease (SARS) there was a rush to sequence the SARS genome and apply for patents.

In response the WHO SARS Consultation Group got together with SARS intellectual property owners to create the SARS IP Working Group to examine the implications of this land grab. The working group concluded the patent thicket developing in the field would discourage investment in R&D, potentially delaying the development of a vaccine. It suggested the formation of a patent pool to steer round this road block.

How to manage patent pools

In the Report of the Commission on Intellectual Property Rights, Innovation and Public Health, published in 2006, WHO encouraged pharmaceutical companies to grant voluntary licences. But NGOs argue that such disparate, voluntary agreements will not give generics manufacturers the confidence they need to invest.

KEI and others have proposed the creation of the Essential Medical Invention Licensing Agency, a non-profit entity, to manage patent pools. Patent owners would be asked to voluntarily license patents for use in countries not designated as high income by the World Bank. In cases where the pool failed to obtain voluntary licences, it might ask governments under the terms of the memorandum of understanding to seek compulsory licences.

The agency would collect royalties from generic manufacturers and pay royalties to patent owners on a pre-determined transparent and predictable formula basis that takes into account the actual use of each patent in the manufacture of products by patent pool licensees.