American Journal of Law & Medicine

The Health of eBay: The Impact of eBay on the Future of TRIPs-Like Pharmaceutical Compulsory Licenses in the United States

I.   INTRODUCTION II.  BACKGROUND      A. COMPULSORY LICENSING INTERNATIONALLY: THE TRIPS AGREEMENT AND         THE DOHA DECLARATION         1. Case Study: Compulsory Licensing in India         2. Case Study: Compulsory Licensing in Brazil      B. COMPULSORY LICENSING DOMESTICALLY: PRE-EBAY V. MERCEXCHANGE      C. COMPULSORY LICENSING DOMESTICALLY: EBAY V. MERCEXCHANGE AND ITS         PROGENY III. ANALYSIS: ASSESSING THE LIKELIHOOD OF PHARMACEUTICAL      COMPULSORY LICENSES IN THE UNITED STATES      A. WILL THE UNITED STATES INCORPORATE TRIPS-LIKE COMPULSORY         Licenses for Pharmaceutical Patents?         1. Factors to Consider         2. Application to the United States      B. SHOULD THE UNITED STATES INCORPORATE TRIPS-LIKE COMPULSORY         LICENSES FOR PHARMACEUTICAL PATENTS?: THE POWER OF A MERE         THREAT  IV. CONCLUSION 

I. INTRODUCTION

With the passage of the Affordable Care Act in 2010, the United States has taken enormous steps toward greater affordability and access to needed medication. (1) Despite the Supreme Court's decision in King v. Burwell, upholding the availability of subsidies in federally-run insurance exchanges, the Affordable Care Act may nonetheless continue to face myriad challenges. (2) Due to the controversy surrounding the passage of the monumental Act and the concerns that the United States faces as a result of the structure of its healthcare industry, discourse on the subject of how to achieve affordable medical care must continue. One possible recourse to achieve greater access to medication, however unlikely, is the use of pharmaceutical compulsory licenses.

The decision of eBay v. MercExchange altered the framework of injunctive relief for patent disputes in the United States. In the 2006 Supreme Court decision, the Court rejected the categorical rule automatically granting permanent injunctions in patent infringement disputes, (3) holding that the four factor test traditionally applied in equity cases seeking injunctive relief applies with equal force to injunctive relief disputes involving patents as well. (4) Since the monumental eBay decision, it appears that courts have become willing to reject injunctive relief, and instead adopt de facto compulsory licensing as a potential remedy in patent infringement lawsuits where a consideration of the four factors indicates it is the fairest outcome. (5)

Recently, in the international context, many countries have already taken the step forward in the use of such compulsory licenses for patented pharmaceuticals in the face of public health crises. In 1994, the World Trade Organization ("WTO") member-states enacted the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement"), a treaty setting forth the most comprehensive protection of international intellectual property rights on a global scale. (6) The WTO initiated the TRIPS Agreement pursuant to the motivations of developed countries to set relatively strong intellectual property protections as a means to enhance development and, consequently, international economic growth. (7) The TRIPS Agreement was the byproduct of an initiative of numerous developed countries to establish a mandated floor for international intellectual property protection and to guarantee implementation of patent rights for those who have invested considerably, such as research-based pharmaceutical enterprises. (8)

Nevertheless, a number of developing countries, such as Brazil and South Africa, coordinated to highlight flexibilities within the TRIPS Agreement with the goal of ensuring access to affordable medications in the wake of public health crises such as growing HIV and AIDS concerns. (9) In response to the concerns that firm obedience to the TRIPS Agreement would negatively impact public health in developing countries, (10) in 2001, WTO member nations promulgated the Doha Declaration on the TRIPS Agreement. (11) The Doha Declaration did not establish any substantive changes to the TRIPS Agreement itself, but it clarified that the TRIPS Agreement should be read and implemented in a way that does not hinder member nations' ability to address public health concerns. (12) The crux of the pronouncement states: "[W]e affirm that the [TRIPS] Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' rights to protect public health and, in particular, to promote access to medicines for all." (13)

Consequently, this recent trend in patent protection post-eBay creates the question whether eBay has opened the door to a legislative compulsory license regime in the face of grave public health concerns within the United States, similar to those license regimes enforced internationally since the enactment of the Doha Declaration of the TRIPS Agreement. Before addressing this question, it is important to note that at present, the United States does not maintain a separate governmental body that reviews and grants compulsory licenses, as is seen in other countries; rather, the judicial system here achieves the effect of a compulsory licensing by rejecting injunctive relief. (14) As a result of eBay, however, and the Supreme Court's apparent willingness to consider "compulsory licensing" in certain instances, it is possible that United States policymakers may begin to rethink the notion of exclusivity in the realm of patent protection. In such an atmosphere, Congress may be more receptive to a legislative compulsory license regime for extreme cases. While it is unlikely that the use of compulsory licenses for pharmaceutical products as a remedy for public health emergencies will become the norm in the United States, eBay provides the framework for a more welfare-conscious patent regime and may even be the beginning of a paradigm shift in the United States with regard to patent protection.

This Note is composed of two Parts. Part I introduces relevant background. First, the Section presents the history of the TRIPS Agreement and the subsequent Doha Declaration as well as case studies illustrating the subsequent application of pharmaceutical compulsory licenses globally. Additionally, this Part includes an analysis of the history of injunctive relief in the United States before and after the monumental eBay v. MercExchange decision. Section II assesses the potential use of compulsory licenses for pharmaceutical products in the United States in the face of public health concerns. To do so, this Section utilizes four factors that bear on the relationship between compulsory licensing and innovation. Furthermore, Section II examines the aforementioned case studies to assess the feasibility of a similar approach domestically, while considering the impact of the numerous differences between the United States and the developing countries that have thus far employed compulsory licensing to achieve greater access to health care. In light of these considerations, the Section ends with a recommendation as to the optimal use of compulsory licenses in the United States.

II. BACKGROUND

Before delving into the possibility of a compulsory license regime for pharmaceutical patents in the United States after eBay, an examination of the successful use of compulsory licensing abroad may shed light on the applicability of such practices at home. However, it is first necessary to understand the context that gives rise to the motivations for compulsory licensing. The sine qua non of patent law is the tradeoff between providing incentives for individuals and corporations to invest in research and development, while also providing access to such works for the betterment of society. (15) To achieve this end, a patent affords a creator a limited monopoly on the use of the fruits of his or her labor, such that there exists sufficient motivation to innovate and produce inventive, beneficial creations for society. (16) The Supreme Court in Sony Corp. v. Universal City Studios stated: "The monopoly privileges that Congress may authorize are neither unlimited nor primarily designed to provide a special private benefit. Rather, the limited grant is a means by which an important public purpose may be achieved." (17) Thus, the "public purpose" the Court describes is the protection of incentives to innovate and thus the production of novel technologies for the benefit of the public as a whole. (18)

A patent holder's limited monopoly, better understood as the "right to exclude," is "one of the most essential sticks in the bundle of rights" that law affords to a patent holder. (19) To enforce this right, courts in the United States have historically used injunctive relief to protect a patent holder's monopoly on an invention. (20) The United States Patent Act instructs courts to grant permanent injunctions, prohibiting a non-patent holder from making use of a patented product during the life of an existing patent: "[t]he several courts having jurisdiction of cases under [the Patent Act] may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable." (21)

Practically, a patent holder cannot enjoy the right to exclude without the availability of injunctive relief. (22) Remedial monetary damages are often insufficient to protect the exclusionary right that the Patent Act affords, as they merely provide compensation to the holder of a patent subsequent to infringing use by another party. (23) When considering a claim for injunctive relief in the form of a permanent injunction, courts have historically examined four factors: (1) whether the plaintiff will suffer an irreparable harm if the court does not grant an injunction; (2) whether monetary damages or other remedies available at law would inadequately compensate for that injury; (3) whether a remedy in equity is warranted upon a balance of the hardships between the patent owner and infringer; and (4) whether the public interest would not be harmed by a permanent injunction. (24)

Despite the importance of injunctive relief to protect the right to a limited monopoly due to a patent holder, the practice undoubtedly raises costs by allowing the patent holder to set a product price that may exceed what is necessary to recoup the outlay associated with its production. (25) The role of compulsory licensing emerges in such instances where an innovator merely sits on his or her rights and stifles production or raises prices so as to limit access to the innovation. (26) Compulsory licenses often result from a legislative determination that circumstances exist to permit someone other than a patent holder to produce the patented technology absent the patent owner's consent. (27) As alluded to previously, courts may also achieve the effect of a compulsory license by denying injunctive relief, thus undermining a patent holder's monopoly right to the invention. (28)

Ultimately, the monopoly effect of the patent system and its potential negative implications motivated developing countries around the world to seek adjustments to the stringent patent protections that the TRIPS Agreement provided at the time. (29) The global implementation of compulsory licenses under the TRIPS Agreement and subsequent action after the Doha Declaration may serve as a guide for considering the potential use of compulsory licenses domestically if faced with a public health crisis.

A. COMPULSORY LICENSING INTERNATIONALLY: THE TRIPS AGREEMENT AND THE DOHA DECLARATION

The TRIPS Agreement came into effect in 1994 as a result of pressure from industrialized countries to negotiate higher standards of intellectual property rights so as to raise the level of protection for patents and other intellectual property in developing countries. (30) Not only did the TRIPS Agreement create higher standards, but it also extended international intellectual property protection to previously untouched subject matter in most countries, such as pharmaceutical products, food products, chemical products, and many others. (31) The rationale for the introduction of higher international standards was to encourage development and transfer of technology. (32)

Sparked by the concerns of American industries that inadequate international intellectual property protection resulted in severe monetary losses in a number of industries (such as computer software, chemicals, and pharmaceuticals), multinational trade negotiations commenced in 1986. (33) In what is known as the Uruguay Round, member nations of the General Agreement on Tariffs and Trade ("GATT"), lead by the United States and other developed countries, negotiated for increased protection for intellectual property rights in developing countries that lacked equivalent standards to their own. (34) Some have argued that not only did the TRIPS Agreement seek to heighten safeguards against counterfeiting and piracy around the globe, but it also advanced "technological protectionism." (35) In effect, the TRIPS Agreement "consolidated] an international division of labour whereunder Northern countries generate innovations and Southern countries constitute the market for the resulting products and services." (36)

Since the outset of the negotiations surrounding the TRIPS Agreement, developing countries have opposed a stricter patent regime and its impact on inventions related to public health and nutrition. (37) For the vast majority of individuals in developing countries, stringent patent protections on pharmaceutical drugs are an "unbearable burden," as the patent monopoly rights ultimately place needed medicines financially out of reach. (38) Despite these trepidations, developing countries reluctantly accepted the TRIPS Agreement. (39) Nevertheless, confronted with public health concerns and the unavailability of pharmaceuticals, developing countries petitioned for cheaper and more accessible medications than those sold by big pharmaceutical companies under patent protection afforded by the United States and other developed countries. …

Log in to your account to read this article – and millions more.