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25 Jun 2020

The race for the COVID-19 vaccine and patents: Do we need a temporary lockdown?

By James Neil and Richard Hoad

Australian patent law already contains mechanisms to enable "special access" to patented pharmaceuticals and other technologies, including (perhaps especially) in times like this.

The COVID-19 pandemic has turned the economy on its head. At a governmental level, measures have been implemented throughout the world which, in many countries at least, would have been considered dystopian just a few months ago. Fiction has become reality.

Some have suggested that the patent system should not be immune from this upheaval, and have effectively called for a temporary lockdown of the patents system. The concern, it is said, is that the patent system will inhibit access to effective treatments – and (eventually, it is hoped) a vaccine – for the SARS-CoV-2 virus. Others insist that, without the incentives for innovation provided by the patent system, a vaccine may not be developed in a timely fashion, if at all.

Several teams are currently working on the development and/or testing of a SARS-CoV-2 vaccine in Australia, with human trials commencing recently. Australian individuals, research organisations and firms have been responsible for some momentous medical advances in recent decades, such as the Cochlear implant and the Gardasil and Cervarix vaccines. It is entirely possible that the first effective SARS-CoV-2 vaccine is developed in Australia, with an Australian firm securing patent rights to the vaccine.

If that occurs, it is important to remember that a patent is not an impenetrable fortress. Patent laws already contain mechanisms to enable "special access" to patented pharmaceuticals and other technologies, including (perhaps especially) in times like this.

Notwithstanding the gargantuan investment which will be required to develop an effective vaccine, many have effectively called for a hibernation of the patents system when it comes to COVID-19.

Compulsory licenses

In normal circumstances, the patentee of a standard Australian patent has the right to exploit the patented invention for 20 years. Anyone wishing to exploit the invention for commercial gain must first obtain a licence – normally by way of negotiation.

However, the Australian Patents Act contains provisions which enable a party to obtain a compulsory licence in appropriate circumstances, which in general terms are where:

  • the patentee has contravened, or is contravening, certain laws prohibiting anti-competitive conduct in connection with the patent; or
  • there is a "public interest" need to grant such a licence.

    Under the "public interest" path, such a licence can be obtained where an applicant demonstrates that:

  • demand in Australia for the patented invention is not being met on reasonable terms (in other words, the patentee is either refusing to license its invention at all, or will only do so on objectively unreasonable terms);
  • authorisation to exploit the invention is essential to meet that demand (in other words, the problem cannot be solved via some other means – eg. another drug);
  • the applicant has tried for a reasonable period, but without success, to obtain authority from the patentee to exploit the invention on reasonable terms and conditions (in other words, the applicant has made multiple reasonable offers to the patentee which the patentee has rejected);
  • the patentee has given no satisfactory reason for failing to exploit the patent to the extent necessary to meet the demand for the invention in Australia ("the dog ate my vaccine" will not suffice); and
  • it is in the public interest to provide the applicant with access to the invention, having regard to a range of matters, which include:
    • the benefits to the public from meeting the demand for the invention;
    • the commercial costs and benefits to the patentee and the applicant from providing authorisation to exploit the original invention; and
    • any other matters the court considers relevant, including matters relating to encouraging competition and any impacts on innovation.

A compulsory licence has never been granted in Australia, and has rarely been sought. However, these provisions were presciently amended earlier this year (prior to the onset of the COVID-19 pandemic) with a view to making such a licence more accessible. Rather than a public interest test, the applicant needed to demonstrate that "the reasonable requirements of the public" with respect to the patented invention had not been satisfied. Factors which suggested that "the reasonable requirements of the public" were not being met included that:

  • a trade or industry in Australia was being unfairly prejudiced by the conditions attached by the patentee to the purchase, hire or use of the patented product; or
  • the patented invention was not being worked in Australia on a commercial scale, but was capable of being worked in Australia.

It is suggested that the current test's more streamlined approach will make it easier for applicants to obtain a compulsory licence on a "public interest" basis. The patent owner will not be left without compensation for the grant of the compulsory licence: it will be paid an amount agreed between it and the applicant for the compulsory licence or, if no agreement can be reached, the licence fee will be determined by the Court.

An application for such a compulsory licence can only be made after three years have elapsed since the relevant patent was granted. Some might argue that, as a consequence, the patentee of a patent for a SARS-CoV-2 vaccine would have too long to exclusively exploit the invention before a compulsory licence could be granted. Indeed, given the unprecedented pace at which SARS-CoV-2 vaccine research and development is proceeding around the world (and the abridged processes for regulatory approval which have been foreshadowed), it is likely that distribution of any vaccine will commence well before any patent covering the vaccine technology goes to grant. However, these compulsory licences are not the only mechanism by which "special access" can be obtained to a patented invention.

What if a developing country needs access to the vaccine?

Since 2015, the Australian Patents Act has contained a mechanism by which compulsory licences for patented pharmaceutical inventions may be sought and granted to enable the manufacture of a pharmaceutical product in Australia for export to an eligible importing country.

To obtain a compulsory licence, an application must be made to the Federal Court of Australia. The Court may then grant the licence if, among other factors:

  • the application is made in good faith;
  • the pharmaceutical product is to be imported by the eligible importing country or an authorised third party importer;
  • the proposed use of the pharmaceutical product is to address a public health problem in the eligible importing country (eg. a national emergency or other circumstances of extreme urgency); and
  • exploiting the patented pharmaceutical invention is necessary to enable the import and proposed use of the pharmaceutical product as mentioned above.

Again, an appropriate fee will need to be agreed between the patent owner and the licensee – or, in default of agreement, set by the Court. Notably, the three year period relating to applications for "normal" compulsory licences is not reflected in this part of the legislation.

Crown use

The Australian Patents Act also contains provisions which permit (on appropriate terms) an Australian Government (State or Federal) to exploit a patented invention where doing so is necessary for the provision of relevant services, being services that are primarily provided or funded by Government. This would seem to naturally encompass the provision of health services, including the distribution of vaccines.

There are additional conditions which must be satisfied before the Crown can make use of these provisions. For example, in normal (ie. "non-emergency") circumstances, the relevant Government Minister must consider that the relevant Government authority has tried for a reasonable period, but without success, to obtain an authorisation to exploit the invention on reasonable terms, but has not been able to do so. It is also necessary to provide a written statement of reasons for approving the exploitation.

It would not, however, be necessary for the relevant Government authority to have sought to obtain authorisation from the patentee before exploiting the invention, where the relevant Minister considers that the exploitation is required because of an emergency. Accordingly, assuming a vaccine is developed and the SARS-CoV-2 virus starts to spread at an increasing rate (as it appears to be doing at present, at least in Victoria), it would arguably not be necessary for the Government to carry out negotiations with the patent owner before it exercised its rights under this mechanism.

The patentee would, however, still be entitled to remuneration for the exploitation of its patent. If that amount cannot be agreed, the court will determine an amount that is just and reasonable, having regard to the economic value of the exploitation of the invention and any other matter the court considers relevant. That is likely to be a very large number.

Is hibernation required?

Most accept that the patent system has provided the incentives necessary to drive innovation in pharmaceuticals and medical devices which have profoundly improved health outcomes. Large pharmaceutical companies play an integral development and distribution role in that regard. As Professor Ian Frazer (who developed the HPV vaccine against cervical cancer) recently noted, although many like to criticise large pharmaceutical companies, "if we didn't have big pharma, we wouldn't have a papillomavirus vaccine".

While we rightly acknowledge the tremendous efforts of the world’s frontline healthcare workers, we should also recognise the astonishing progress being made by the world’s medical researchers in isolating and analysing SARS-CoV-2 and investigating potential treatments and vaccines. Their efforts have been tireless, and the expense incurred has been unprecedented.

Notwithstanding the gargantuan investment which will be required to develop an effective vaccine, many have effectively called for a hibernation of the patents system when it comes to COVID-19. For example, an "Open COVID Coalition" has been established, which describes itself as "an international group of scientists and lawyers seeking to accelerate the rapid development and deployment of diagnostics, vaccines, therapeutics, medical equipment and software solutions in this urgent public health crisis". They are promoting the adoption of the "Open COVID Pledge", by which patent and copyright owners would agree to make their patents and copyright material freely available in the fight against the COVID-19 pandemic.

Similarly, Médecins Sans Frontières has called for "no patents or profiteering on drugs, tests, or vaccines used for the COVID-19 pandemic, and for governments to prepare to suspend and override patents and take other measures, such as price controls, to ensure availability, reduce prices and save more lives".

Some Governments (and patent owners) have already started taking steps in this direction. For example, AbbVie's drug "Kaletra" – commonly used for the treatment of HIV – has shown some promising signs in the treatment of COVID-19. AbbVie has indicated that it will not enforce its patent rights relating to that drug, thereby enabling generics to be manufactured which may be used to treat the virus. This came after the Israeli Government took steps to grant a compulsory licence for Kaletra as a treatment for COVID-19.

In Australia, our current laws provide all the protection we need. Early on in this crisis, Shadow Federal Industry Minister Brendan O’Connor was already calling on the Federal Government to consider invoking the Crown use powers, even if only for the urgent manufacture of supplies such as facial masks. However, as explained above, Crown use is not the only option. And although these legislative mechanisms have (at least historically) largely been left to gather dust, they are the legislative equivalent of the ventilator – an option of last resort, but nonetheless there when you need it.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.