Mechanics of COVID-19 Vaccine IP Waiver in View of Trade-Related Aspects of IP Rights

Morgan Lewis
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Morgan Lewis

The Biden-Harris administration announced on May 5 its intent to support a waiver on intellectual property protections on COVID-19 vaccines. The scope of any potential waiver is subject to further negotiation at the World Trade Organization (WTO). Any decision made at the WTO level requires a consensus among all of its 164 members.

Proponents of the waiver include India and South Africa, which argue that such an effort is needed to make the vaccines more widely available. The European Union, the United Kingdom, Japan, and other nations have so far opposed the COVID-19 vaccine IP waiver.

As detailed in the Congressional Research Service Memorandum, updated November 25, 2020, Congress could seek to preclude the exercise of exclusive patent rights over COVID-19 vaccines by passing legislation preventing the US Patent and Trademark Office (PTO) from issuing such patents, or invalidating already issued patents relating to countermeasures. In the latter case, some mechanism for compensation to the patent holder might be required under the Takings Clause.

The bigger issue is whether other WTO member countries can enact laws that allow local manufacture of any locally patented vaccines without running afoul of their obligations under the Trade Related Aspects of Intellectual Property Rights (TRIPS) of the Marrakesh Agreement establishing the WTO. TRIPS requires its member states to have strong patent systems in “all fields of technology,” with some exceptions. These limits on how TRIPS might apply to exclusions from patent protection or compulsory licensing in the COVID-19 pandemic are discussed below and in the Congressional Research Service Legal Sidebar Memo, LSB10436, COVID-19: International Trade and Access to Pharmaceutical Products, excerpted in part, below.

The TRIPS Agreement includes several potentially relevant exceptions to patent protection. First, it expressly permits WTO members to exclude certain inventions from their patent systems if “necessary to protect,” among other things, human life or health. Second, it allows WTO members to exclude “diagnostic, therapeutic and surgical methods for the treatment of humans” from patentability. Third, Article 30 of the TRIPS Agreement allows WTO members to create “limited exceptions to the exclusive rights conferred by a patent.” However, these exceptions: (1) must “not unreasonably conflict with a normal exploitation of the patent;” (2) must not “unreasonably prejudice the legitimate interests of the patent owner;” and (3) must consider “the legitimate interests of third parties.”

The scope of this provision, Article 30, has not been particularly defined. However, some WTO members, such as the United States, Europe, and China, have used it to allow pharmaceutical manufacturers to seek marketing approval of generic drugs before a patent expires. This use, known as a “regulatory exception” (found in US law at 35 U.S.C. § 271(e)(1)), has been considered and approved in the only WTO dispute involving Article 30 of the TRIPS Agreement. Further, some WTO members have relied on Article 30 for research and development purposes, allowing scientists to use a patented product for purposes of better understanding the invention. Accordingly, some countries may potentially be able to enact legislation, consistent with WTO obligations, that provides for certain limited research exceptions to patentability, which may allow researchers to use patented pharmaceuticals relevant to the development of new medical countermeasures to address COVID-19.

Some member countries could also consider whether to require the patent holder to allow others to use the patent in order to meet supply needs, a practice known as compulsory licensing. While seemingly heavy handed, the TRIPS Agreement allows members to act contrary to their obligations to respect and enforce intellectual property rights and enact measures that allow for compulsory licensing on a case-by-case basis, if such measures satisfy several conditions. These conditions include: (1) making an effort to obtain authorization for use from the patent holder on “reasonable commercial terms” before opting for a compulsory licensing measure, except in cases of “national emergency or other circumstances of extreme urgency;” (2) ensuring the measure is time-limited; and (3) paying the patent holder “adequate remuneration.” It is unclear how “adequate remuneration” would be calculated, but history suggests using a reasonable royalty based on past licensing transactions. Interestingly, the two initial proponents of the waiver concept, India and South Africa, already have compulsory licensing laws (which have been used sparingly, if at all).

WTO spokesman Keith Rockwell noted that members have already discussed providing more specifics about how long the waiver would last, since it is intended to be temporary, presumably only during the pandemic, duration. It remains to be seen how these issues will develop. US Trade Representative Katherine Tai cautioned that “those negotiations will take time given the consensus-based nature of the institution and the complexity of the issues involved.”

Morgan Lewis will continue to monitor developments as they occur.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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