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Healthcare International Law

A View from Both Sides: COVID-19, the TRIPS Waiver, IP Rights, and How to Increase the Supply of Vaccines

scientist looking through a microscopeIssue

The United States and other wealthy nations have access to plenty of COVID-19 vaccine doses and thus are beginning to get the pandemic under control, while less affluent countries do not have access to adequate doses and are still struggling with rising cases. In October 2020, India and South Africa proposed addressing this problem by waiving certain portions of the TRIPS Agreement, the most comprehensive agreement on intellectual property (IP) aspects of international trade among the WTO’s 164 member states. The waiver cites “an urgent call for global solidarity, and the unhindered global sharing of technology and know-how in order that rapid responses for the handling of COVID-19 can be put in place on a real time basis.” While this proposal broadly applies to any COVID-19-related technology, much of the conversation is currently focused on vaccines.

The proposal would temporarily suspend patent rights covering COVID-19 vaccines and possibly also be used to compel the transfer of trade secret “know-how” and “show-how.” Proponents say this would allow any manufacturer to begin production—boosting vaccine supply while slashing prices—to end the surge of cases in less developed nations. Critics argue that the reality is more complicated: the waiver will be ineffective, even harmful, and it would have a devastating impact on our readiness for future health crises.

In Support of the Waiver

For supporters of the waiver, the answer is clear: cases are rising in many nations because they still don’t have the vaccines they need. It’s only reasonable to make exceptions to our ordinary system of business incentives during times of global crisis.

The Biden Administration

That is essentially what U.S. Trade Representative Katherine Tai stated when the Biden Administration announced its support for the waiver: “This is a global health crisis, and the extraordinary circumstances of the COVID-19 pandemic call for extraordinary measures. The Administration believes strongly in intellectual property protections, but in service of ending this pandemic, supports the waiver of those protections for COVID-19 vaccines.”

It affects all of us

WHO Director-General Dr. Tedros Adhanom Ghebreyesus says that the “me-first approach” among powerful nations “is self-defeating and will lead to a protracted recovery with trade and travel continuing to suffer.” Under this rationale, even purely self-interested parties should support the waiver, if only because modern commerce is so globally connected.

Dropping IP barriers will facilitate greater collaboration

Many say the threat of IP litigation prevents the kind of collaboration needed to quickly ramp up production and development, and that a waiver can remove that threat. The president of Médecins Sans Frontières, Dr. Christos Christou, says that “[t]he waiver proposal offers all governments opportunities to take action for better collaboration in development, production and supply of COVID medical tools without being restricted by private industry’s interests and actions, and crucially would give governments all available tools to ensure global access.”

Patents were not meant to impede emergency action

A recent editorial in the journal Nature argues that patents are designed to protect ordinary commercial interests, not to hinder global cooperation against a common threat: “A pandemic is not a competition between companies, but a race between humanity and a virus. Instead of competing, countries and companies need to do all they can to cooperate to bring the pandemic to an end.”

It solves an immediate need without setting a troubling precedent

While opponents of the waiver argue that it will weaken future drug patent protection, Imron Aly and Ahmed M.T. Riaz of Schiff Hardin LLP call those concerns “unfounded” in their post at IPWatchdog. Not only is the current proposal limited specifically to COVID-19, but it was also not created carelessly. Instead, it “has taken substantial international efforts and official international law amendments.” Aly and Riaz say this exceptional action is appropriate if it can succeed where our IP system has yet to do so: “The TRIPS waiver simply allows countries the option to suspend patent enforcement to encourage COVID-19 vaccine production, which makes sense for those countries where current investment has not resulted in vaccine access.”

Even if the waiver doesn’t work, it might work

University of Houston Law Center Professor Sapna Kumar acknowledges a number of functional issues with the waiver approach but notes that it may still have a positive effect on the pandemic: “Overall, the greatest benefit of the Biden Administration’s support for the waiver is that it signals a departure from the prior approach of punishing countries facing health crises and that it might spur pharmaceutical companies to voluntarily increase out-licensing and donations of vaccines.” Her prediction was borne out by a recent pledge to donate 2.3 billion doses by Pfizer/BioNTech, Johnson & Johnson, and Moderna.

Opposed to the Waiver

Opponents of the waiver argue that it will not be effective because it fails to address the real problems. Further, it could actually be detrimental to quality control and supply chains in the present crisis, while quite possibly affecting how pharmaceutical companies choose to allocate investment dollars in the future.

It’s a long process that requires much more than a temporary waiver of licenses

Vaccines are not like other drugs. Writing for Foreign Affairs, Peter J. Hotez, Maria Elena Bottazzi, and Prashant Yadav say that we can’t compare the current situation to similar actions on HIV treatments, and that most nations are not prepared to make use of the patented technology: “Producing vaccines—particularly those as technologically complex as the messenger RNA (mRNA) inoculations against COVID-19—requires not only patents but an entire infrastructure that cannot be transferred overnight.” The authors state that “[t]he effective transfer of such complex technology requires a receiving ecosystem that can take years, sometimes decades, to build.”

We need another way

Professor Yogesh Pai of the National Law University Delhi says that simply waiving trade secret protection won’t automatically disclose everything a manufacturer needs to know. Accessing “hard tacit knowledge of manufacturing/quality control measures for production and clinical data required for regulatory clearances” could require forced technology transfer (FTT) by national governments. He recalls how detrimental such efforts were to India’s economy when it tried FTT with Coca-Cola in the 1970s, prompting the company to leave the country altogether.

Prof. Pai instead recommends efforts to encourage voluntary cooperation: “Where blunt legal instruments don’t work, using track-1 and track-2 diplomacy to place moral coercion on western governments to nudge firms to actively engage in technology licensing may still work wonders.”

“China First” policy?

Sixteen U.S. senators issued a sharply worded letter to the executive branch, questioning the true motives of “China and other countries which regularly steal American intellectual property—like India and South Africa,” and expressing shock that an American president would go along with it: “These nations are falsely claiming that granting such a waiver would speed the development of new vaccine capacity. Nothing could be further from the truth.” Instead, the senators are suggesting that the waiver is being used as a means to unfairly to acquire trade secrets that took massive resources and time to develop.

Reuters reports that “some U.S. officials fear the move would allow China to leapfrog years of research and erode the U.S. advantage in biopharmaceuticals” and quotes a senior U.S. official as saying that the country “‘would want to examine the effect of a waiver on China and Russia before it went into effect to ensure that it’s fit for purpose.’”

IP is not the Issue

A waiver on patent rights, even with the corresponding trade secrets, can only give permission to manufacture. But Eva Bishwal of Fidus Law Chambers writes that the real problems in India “are state inaction, dearth of raw materials and low production capacity.”

According to Patrick Kilbride of the U.S. Chamber of Commerce’s Global Innovation Policy Center, and as cited in Pharmaceutical Technology, “[p]roposals to waive intellectual property rights are misguided and a distraction from the real work of reinforcing supply chains and assisting countries to procure, distribute and administer vaccines to billions of the world’s citizens.”

Low-quality vaccines could do more harm than good

Former USPTO Director Andrei Iancu voiced concern recently at a World IP Day event, asking, “if we waive IP rights, and exclude the original manufacturers, how are we going to control the quality of the vaccines that go into people’s arms? How are we going to control for the fake vaccines? Just last week we saw fake Pfizer vaccines.” And as Philip Thompson points out for IPWatchdog, when investigators are forced to “determine if adverse events or sub-par effectiveness originate from ‘real’ vaccines or fake doses, we should expect global production starts and stops to become much more frequent.”

It will discourage investment in the most critical areas

Pharmaceutical developers invest unfathomable amounts of money into bringing drugs to market. The path to success is long, expensive, and highly uncertain. But what is certain is that successful drugs can yield a profit that covers the loss from failures. Now critics are deeply worried that this waiver will skew future cost-benefit analyses against important classes of medicine. All other things being equal, a developer has a better chance at a positive return by investing in drugs that pose no risk of seizure during a global emergency. As Amanda Glassman of the Center for Global Development writes, the waiver sends the wrong message to innovators and investors: “don’t bother attacking the most important global problems; instead, throw your investment dollars at the next treatment for erectile disfunction, which will surely earn you a steady return with far less agita.” The scramble amongst pharmaceutical giants to develop a vaccine was an all-out race, with good reason, and that’s exactly how it should be. If those companies believe that forfeiture is waiting at the finish line next time around, we might see fewer contestants.

Even “no-profit” vaccine makers appear to oppose the waiver

Pfizer CEO Albert Bourla laid out everything the company has done to combat the vaccine in an equitable manner and argued that “waiver of IP rights could only derail this progress.” And while Pfizer and Moderna are selling their vaccines at a profit, Johnson & Johnson and AstraZeneca have pledged not to do so during the pandemic.

However, it appears that even those companies oppose the waiver. As reported in The Wall Street Journal, the trade group PhRMA, which represents Johnson & Johnson and AstraZeneca among many others, is “lobbying members of Congress to oppose the Biden administration’s support for the waiver.” Johnson & Johnson’s Chief IP counsel Robert DeBerardine says that patent rights are responsible for the breakneck pace of development and that the drug’s makers are the best-equipped people to continue the fight: “What we’re able to do, because we have control of the IP, is to pick the best companies to help us supply the world. If you were to give everything to everybody, you may see a flood of vaccines, but you would have no idea if they’re safe and effective.”

Conclusion

While we share the concerns of other organizations that effective, affordable, and accessible vaccines be made available to all persons regardless of location or wealth, we do not believe that upending longstanding U.S. patent policy for a solution that will do little if anything to increase the vaccine supply is advisable. Strong IP rights remain the best way to incentivize innovation and ultimately increase the supply of life-saving medicines. The Biden administration’s unprecedented support of the proposed WTO IP waiver, while well intended, is likely to create long-term harm and unlikely to have much of an impact on global vaccine supplies. Ultimately, encouraging companies to license IP and engage in voluntary knowledge transfer, along with the sharing of excess doses that are being produced, are methods far more likely to alleviate the vaccine supply issues than waiving IP rights and would be a better path forward out of the current crisis.

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International Law Patent Law Patent Litigation

Hudson Institute Panel Focuses on Patent Litigation in China

The following post comes from Wade Cribbs, a 2L at Scalia Law and a Research Assistant at CPIP.

a gavel lying on a desk in front of booksBy Wade Cribbs

Questions about how Chinese patent protection operates in the international patent landscape are relevant to both companies doing business in China and policymakers in the United States. China is becoming an increasingly frequent patent litigation location for major international corporations. With this new forum for patent disputes come questions about how China can handle anti-suit injunctions and parallel proceedings regarding fair, reasonable, and non-discriminatory (FRAND) agreements for standard-essential patents (SEPs).

To discuss these questions, the Hudson Institute hosted a virtual panel presentation last week entitled Patent Litigation in China: Navigating a Changing Environment. The panel, which was moderated by Hudson Institute Senior Fellow Urška Petrovčič, included Mark Cohen (Distinguished Senior Fellow, University of California Berkeley; Director, Berkeley Center for Law & Technology, Asia Intellectual Property Project), Vivienne Bath (Professor of Chinese International and Business Law, University of Sydney), and He Jing (Founder, GEN Law Firm; Executive Director, Beijing Zhongguancun Intellectual Property Strategy Research Institute).

Mr. Cohen sees differences in patent litigation between western countries—such as the United States and the European Union—and China, particularly with injunctions due to China’s quasi-civil law system and the Chinese economy’s size. He does not view the recent emergence of anti-suit injunctions in China as unusual because they were not necessary, given that China readily awards injunctive relief. It is not unusual for the courts to get through litigation and appeal in China before a U.S. court has commenced discovery. Therefore, a litigant could initiate proceedings in China after suing in the United States and receive an injunction from the Chinese court, using it to compel the party to settle any parallel proceedings.

Mr. Cohen sees no real difference between the current practice of anti-suit injunctions and Chinese courts’ prior practice of ignoring any parallel proceeding. He agrees with Prof. Bath that the shift of Chinese courts to anti-suit injunctions is motivated by judicial sovereignty and the desire to exercise power over international FRAND rate disputes in order to protect Chinese business interests. Mr. Cohen is concerned that this desire is expanding to dictate international behavior in technological markets by leveraging SEP holders.

Mr. Jing believes that the most important SEP disputes in China are focused on the issuance by Chinese courts of anti-suit injunctions, which he notes are relatively recent for these courts. Chinese courts award these injunctions in such circumstances as preventing Huawei from enforcing a German court’s holding of a FRAND rate that was significantly higher than the rate issued by the Chinese courts. Similarly, Chinese courts have issued preliminary anti-suit injunctions against Sharp Corporation, preventing Sharp from initiating litigation in Germany after it began litigation in China.

Mr. Jing admits the logic is straightforward in the case of cell phone manufacturing, since most of the global manufacturing occurs in China. Therefore, he posits that China should have a say in cell phone SEP FRAND rates. However, he is unsure whether there is proper jurisdiction for such cases. To claim jurisdiction in some cases, Chinese courts docket FRAND disputes as contract cases. Mr. Jing’s problem with FRAND as a contract is that there is no concluded contract, and he is not convinced that such disputes meet the specific legal standard required by Chinese law to hear foreign and international contract disputes. Mr. Jing is concerned that Chinese courts are stretching beyond their bounds for jurisdiction and service to hear cases.

Prof. Bath observes that since the Chinese court systems are now fully equipped to handle IP cases, they are incredibly litigious. In this setting, the Chinese Communist Party is trying to tighten its control over the courts’ behavior as the courts streamline the process and improve injunctive enforcement. Prof. Bath sees these two forces resulting in the Chinese court system seeking to use Chinese law in an international setting through attracting dispute resolution to China. The China International Commercial Court and the one-stop diversified dispute resolution, which combine mediation and litigation in the court system, are examples of how the Chinese government is trying to attract foreign arbitration to China.

However, when it comes to international agreements, Prof. Bath notes, China has tended to agree to international instruments only where it is exempt from intellectual property judgments. Prof. Bath warns that, while China is taking steps to make its courts more available for international litigation, it is necessary to remember that the court does not always decide adjudication. Senior judges who did not sit for the case may make the final adjudicative decision, and this risks politicizing any crucial adjudication rulings.

Professor Bath sees the Chinese courts’ problem with parallel proceedings in the form of anti-suit injunctions stemming from its focus on judicial sovereignty. This focus results in China not having many tools to handle parallel proceedings. The Chinese courts will hear almost any suit brought before the court and will not refuse the case because it is already being heard elsewhere, unless a foreign judgment has already been issued and enforced in China. These practices result in foreign judgments being rarely enforced in China as a result of a Chinese court’s having already begun proceedings.

To watch the video of the panel discussion, please click here.

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Copyright

Can Copyright Help Fight Censorship in China?

cameraFree expression in China has long been a fraught concern for the entertainment industry. Last year, Chinese regulators forbade local companies from working on foreign films that could “harm national dignity and interest of China, cause social instability, or hurt the national feeling,” striking at the rapidly expanding Chinese post-production industry for Hollywood films. A further proposed regulation, now winding through China’s political—and politicized—approval process, demands “excellence in both professional skills and moral integrity” from the Chinese film business. As Chinese investors continue to acquire stakes in Hollywood studios and cinema chains, these regulations threaten to undermine global film producers striving to gain market share in China’s enormous entertainment sector.

China’s local film industry also stands to suffer from the new draft film laws, which codify the view of China’s top political advisors that movies need to be “more centered on the people, guided by core socialist values.” The national media regulator in China has already warned local entertainment and media programs not to “express overt admiration for Western lifestyles,” not to be overly commercial, and not to forget to inject communist values in their products. The results with respect to local production have been underwhelming: films with overtly communist messages have done poorly at the box office, while films that cater to audiences’ fascination with Western tastes and values remain hugely popular and in demand.

Chinese policy makers’ zeal for regulating and curtailing free expression seems unlikely to abate. Yet at the same time, Chinese audiences’ hunger for a broad array of expressive content, including works that openly embrace Western values and preferences, seems equally strong and unlikely to subside. Can this conundrum be resolved, or at least improved, anytime soon?

A fascinating paper by CPIP Senior Scholar Eric Priest offers a market-based analysis that gives hope for a way forward to gradual—and meaningful—liberalization and reform of the formal rules that govern China’s entertainment industry. Priest argues that copyright laws and practices can strengthen commercialization in the Chinese film industry, creating “complex interlocking power relations between the audience, producers, and censoring authorities.” The strength of market-backed private producers in this regime is considerable and creates leverage that can effectively push back against the authority of government censors. The concentrated strength and influence of private producers in China, underpinned and driven by market forces and economic realities, can provide a counterbalance to state censorship that Priest argues “will erode censorship practices and increase expressive diversity in Chinese media.”

Central to Priest’s analysis is the importance of copyright law as a tool for creating private property rights in original expression and thereby enabling private producers to create and commercialize new works. While many scholars argue that copyright law creates legal barriers around expressive works and thus works in parallel with state censorship, Priest argues quite the opposite. He contends that copyright bolsters private production of creative works, making it easier for film producers to push back against censors while offering popular market-based (rather than merely state-approved) creative content.

Priest’s analysis of the development of the Chinese film industry, and his exploration of the gradual way in which its state-mandated boundaries are being tested and slowly moved, is rich and detailed. He is careful to note the limits of even gradual market-based reform, pointing to films that have not been approved, sometimes for unclear reasons. Further, he recognizes that attempts by the Chinese government to allow a more open media while simultaneously seeking to maintain ideological control may create an irreconcilable dilemma for Chinese policymakers.

Priest suggests that a hardline turn is a possible outcome, but he argues that it would lead to a downturn in the Chinese film industry that would be unacceptable to Chinese authorities. He argues that Chinese censorship officials would be better off taking a “more organic, permissive, and experimental approach to censorship practice, while leaving the more restrictive formal laws intact as a baseline standard until circumstances warrant a change in formal laws.” As noted earlier, this does not appear to be the direction in which the government is currently headed, suggesting that other priorities—such as upholding socialist norms, embracing didacticism, and promoting authoritarian tenets—may remain the order of the day in China. But Priest takes the long view, and so should we: the film market will speak in China, and it will speak loudest when it is supported by market realities and the choices of the people it serves.