COVID-19 and Intellectual Property Rights: The Promises and Limitations of a WTO Vaccine Intellectual Property Waiver

Over the past year and a half, COVID-19 has ravaged the planet. However, in the past few months, while the developed world, spurred by high-efficacy vaccines, has enjoyed relative normalcy, the developing world has suffered the worst of the pandemic. [1] This disparity has sparked debate around whether the World Trade Organization (WTO) should grant an Intellectual Property (IP) waiver for technology related to COVID-19 vaccine production. This waiver would protect national governments that issue a compulsory license—the right to produce a patented product—to its companies for the vaccine from legal action by other members. [2] The resulting increase in producers would theoretically fuel a decrease in vaccine prices, making vaccines available to poorer nations. 

Yet, while much of the discourse around an IP waiver focuses on the economics, there has been little consideration of the critical legal questions involved. The scope of the waiver, the compensation due to patent holders, the licensing procedure, and imports—a particularly relevant question since many countries in need of vaccines do not have the technology to produce them—remain unaddressed. Ultimately, it is evident, given the circumstances created by the pandemic, that the WTO agreements permit an IP waiver, but that existing legal infrastructure is ill-equipped to tackle the urgent need for COVID-19 vaccine distribution. 

The most pertinent document in the vaccine waiver debate is the Trade-Related Intellectual Property Rights Agreement (TRIPS), Annex 1C of the 1994 Marrakesh Agreement that established the WTO. Obtaining an IP waiver entails submitting a request to the TRIPS Council, an international forum, which will recommend it to the WTO’s General Council if it merits approval. For full approval, the waiver needs the support of all member states; however, it can be adopted with three-fourths support to apply only to affirming nations. The TRIPS Council has already recommended the vaccine waiver proposal to the General Council, where it will likely garner slim super-majority support. [3] In this scenario, only affirming nations cannot seek legal penalties if another nation grants a compulsory license to produce the vaccine. 

TRIPS raises four key legal issues for a COVID-19 vaccine patent waiver: the IP aspects covered, licensing procedure, imports, and compensation. Critically, the waiver’s efficacy rests on whether it sanctions the use of all the IP necessary to produce the vaccine. Furthermore, because the patent holders did not violate antitrust laws, generic manufacturers must seek a voluntary license from the patent holder first. Finally, while the waiver permits nations who cannot produce the vaccines themselves to import them, the possibility of non-approving nations taking legal action limits the waiver’s scope to vaccines from companies based in nations that approve the waiver.

First, if the ratified waiver covers only vaccine patents, it will be largely ineffective, since software, product design, and trade-secrets on production techniques remain necessary for vaccine production. Consequently, a viable agreement must encompass waivers from TRIPS Part II Section 1: Copyright, Section 4: Industrial Designs, Section 5: Patents, and Section 7: Undisclosed Information. Only these elements in tandem endow manufacturers with the legal and technological ability to produce the vaccines. While the current proposal does include these, there is no guarantee that the final waiver will be as expansive, given the hesitation of many member-nations to adopt the proposal in the first place. [4]

The scope of the waiver is further limited by TRIPS Article 31, which mandates that generic manufacturers seek a “voluntary license” first (i.e. attempt to obtain permission from patent holders) and that the compensation due to the patent holder reflect the “economic value” of lost profits. [5] The most liberal exceptions to these parameters are reserved for anti-competitive practices. In this case, the WTO waives the mandate to first seek a voluntary license from the patent holder, allows export, and reduces remuneration. [6] In other words, these allowances would shorten the application timeline, assist nations who cannot produce the vaccine themself, and make a license to produce the vaccine less financially prohibitive—all measures that could be vital to the widespread distribution of the COVID-19 vaccine.

Consequently, any antitrust violation by the standards of member-nations seeking to issue a license to produce the vaccine could increase the waiver’s power. In the U.S., a potential exporter of generic vaccines, this means that if Pfizer, Moderna, or any other leading vaccine producer is found to have breached U.S. antitrust regulations, the scope of the license could expand dramatically. Legal scholars such as Barak Orbach contend that the vast dissemination of patented vaccine information between competitors may constitute antitrust violations. [7] However, a recent decision from the U.S. District Court of Southern California in Allele Inc. v. Pfizer Inc. and BioNTech Inc. asserts that sharing of patented information between competitors is permitted by the Patent Act Section 271(e)(1) in the U.S. Legal Code. Allele alleged that Pfizer had committed patent infringement by using its fluorescent protein to analyze clinical trial samples. But while the District Court Judge ruled in favor of Allele due to their protein being a “research-tool,” she affirmed that access to patented information on competing devices was necessary for implementation of the Patent Act. She concurred with the Supreme Court’s assessment in Eli Lilly & Co. v. Medtronic, Inc., a landmark 1990 decision on patent law in developing medical devices: 271(e)(1) prevented an effective extension of the patent period by allowing competitors to begin producing patented products before the end of the patent period and begin sale immediately upon expiration. [8] Thus, there was no violation of antitrust law in the dissemination of information between competitors, since that information could be legally used even without the consent of the patent holder. At least in this context, a compulsory license issued by the U.S. for the vaccine would not be eligible for the liberal exceptions to TRIPS exclusively offered to combat anti-competitive practices.

Furthermore, amid vaccine development, the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) affirmed the rights of vaccine producers to collaborate. Stating that such arrangements were typically procompetitive, they granted broad permission “to collaborate on research” and use joint-purchase agreements. [9] Considering U.S. Courts use the “rule of reason” standard in antitrust cases, weighing whether collaborations support or impede competition, the DOJ and FTC’s conviction that these arrangements are mostly “procompetitive” implies courts will not dispute these collaborations. [10] At least by U.S. standards, vaccine manufacturers have not broken antitrust laws and therefore the provisions for anti-competitive practices will not be in effect.  Thus, generic manufacturers will still have to seek a voluntary license from patent holders first to produce the vaccine, compensate them in full, and face restrictive export constraints. 

Additionally, TRIPS Article 31 stipulates that “adequate remuneration” must be paid to the patent holder, but leaves this issue to be resolved in member-state courts. The compensation structure in the United States—a potential exporter of generic vaccines to developing countries—presents both opportunities and challenges. Under 28 U.S.C.S. § 1498(a), any compulsory license issued by the federal government “shall be construed as use or manufacture for the United States.” [11] This was interpreted in the 2002 U.S. Appeals court case Madey v. Duke as granting “sovereign immunity” to the private corporation. [12] Thus, the government assumes full financial responsibility for remuneration to the patent holder. At least in the U.S., this provision makes a compulsory license more accessible to other corporations, since corporations would be much more likely to apply if they could not be liable to the patent holder. Yet, this undertaking could be seen as the U.S. government essentially purchasing vaccines for other countries. This is a prospect that could become a contentious political issue, since nearly half the American public favors cuts to the already modest foreign aid budget. [13]

Furthermore, while TRIPS’ most important interpretation, the Doha Declarations of 2001, expanded importation for products under the waiver, it too imposes stringent limits. [14] The declaration affirmed the right of countries who could not produce generic drugs to import these and waived their responsibility for remuneration, leaving the liability with exporters. [15] However, a 2003 decision from the WTO General Council, “The Implementation of The Doha Declarations Paragraph 6,” stipulates that the compulsory license is granted to a producer only to export the amount necessary based on approved projections. In this case, the member-nation issuing a compulsory license to export the vaccine must submit exact quantities and product information being exported. This request process will likely create substantial delays, inhibiting a robust response to the evolving pandemic. [16]

The most restrictive aspect of the agreement, however, is one not addressed by the Doha Declarations. If the waiver is approved by the General Council without a consensus of member nations—i.e. with solely three-fourths approval—then nations who disapproved need not adhere to the waiver agreement. This creates many possible legal complications. For instance, one can consider the case where the United States is among the three-fourths of member nations approving the agreement, but the United Kingdom is not. Then, if the United States issues a compulsory license for a U.S.-based generic manufacturer to export the AstraZeneca vaccine (developed by a U.K.-based company), the British government would be free to take legal action against the United States. Notably, however, the only other time these provisions for exports were used—when the Canadian government issued a compulsory license to manufacture generic HIV medication in 2007—the patent holder waived compensation. [17] Thus, companies may not necessarily take action for patent infringement and, therefore, the issue of non-approving nations could become a moot point. Nevertheless, while the Doha Declarations permit the export of generic drugs and waive liability for importers, restrictive supply constraints and lack of protection for exporting nations make exports difficult in practice. [18] It is infeasible for governments to issue a compulsory license to companies if they will be liable to foreign nations and, thus, this essentially restricts the license to products where the patent holder resides in a nation that approved the waiver.

Overall, even under current circumstances, a vaccine IP waiver has striking limitations. Generic manufacturers seeking to produce the vaccines must first seek permission from the patent-holder, and the export supply must be carefully managed. These factors will create delays that make supplying a changing vaccine landscape—with new COVID-19 variants emerging and booster shots potentially becoming necessary—extremely difficult. And while the government taking liability for the compulsory license makes the waiver less prohibitive, the possibility of foreign patent holders or nations pursuing remuneration will impose a de-facto restriction to compulsory licenses for patent holders from nations who approve the waiver. Fundamentally, these limitations pose a vital question: could the COVID-19 vaccine waiver issue reshape global intellectual property law? Clearly, the system remains ill-equipped even after the Doha Declarations to respond to a dynamic, global emergency and has no consideration for the public sector’s contribution to product development, which was pivotal in the vaccine race. These issues must ultimately be resolved to save lives in the COVID-19 pandemic and future crises.

Edited by Artem Ilyanok

Sources:

[1] Tracking covid-19 excess deaths across countries, The Economist (2021), online at https://www.economist.com/graphic-detail/coronavirus-excess-deaths-tracker (visited July 17, 2021).

[2] World Trade Organization General Council, “Agreement on Trade-Related Aspects of Intellectual Property Rights,” 1867, 1-31874 The Marrakesh Agreement Establishing the World Trade Organization, 320 (2001) online at https://www.wto.org/english/docs_e/legal_e/27-trips.pdf (visited July 17, 2021).

[3] Robert Clarke, R. Lee Fraley P.C., Jeffrey Morton, Ph.D. P.C., Home of the Free, Land of the Waive? Patent Waivers in the Time of Covid-19, JD Supra (2021), online at https://www.jdsupra.com/legalnews/home-of-the-free-land-of-the-waive-9865563/ (visited July 17, 2021).

[4] WTO Trade Representatives of India and South Africa, Waiver from certain elements of the TRIPS Agreement for the prevention, containment, and treatment of COVID-19 (2020), online at  https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/IP/C/W669.pdf&Open=True

(Visited July 25, 2021).

[5] World Trade Organization General Council, “Agreement on Trade-Related Aspects,” article 31, 333.

[6] Id at 334.

[7] Barak Orbach, On the COVID-19 Vaccine Corporate Pledge, Harvard Law School Forum on Corporate Governance (2021), online at https://corpgov.law.harvard.edu/2020/09/10/on-the-covid-19-vaccine-corporate-pledge/ (visited July 17, 2021).

[8]  Allele Biotechnology and Pharmaceuticals., Inc. v. Pfizer., Inc. et al, No. 20-CV-01958-H-AGS, 2021 WL 1749903 (S.D. Cal. 2021), online at https://law.justia.com/cases/federal/district-courts/california/casdce/3:2020cv01958/689192/42/

(visited July 10, 2021).

[9] The Antitrust Division of the Department of Justice and the Bureau of Competition of the Federal Trade Commission, Joint Statement Regarding COVID-19, The United States Department of Justice (May 2021), online at https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19 (visited July 17, 2021)

[10] Orbach, On the COVID-19 Vaccine.

[11] 28 U.S.C.S. § 1498(a), online at https://www.law.cornell.edu/uscode/text/28/1498

 (visited July 10, 2021).

[12] Madey v. Duke, 307 F.3d 1351, 1352 (U.S. App. 2002).

[13] Eyokley, “Many Voters Support Foreign AID Cuts, but Want More Spent at Home.” Morning Consult, March 22, 2017. https://morningconsult.com/2017/03/22/many-voters-support-foreign-aid-cuts-want-spent-home/. 

[14] World Trade Organization General Council, The Doha Declarations, World Trade Organization (2001), online at https://www.wto.org/english/res_e/booksp_e/ddec_e.pdf (visited on July 17, 2021).

[15] Id.

[16]  World Trade Organization General Council, Implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health, World Trade Organization (2003), online at https://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm (visited on July 17, 2021).

[17] World Trade Organization General Council, Amendment to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), World Trade Organization (2017), online at https://www.wto.org/english/tratop_e/trips_e/tripsfacsheet_e.htm (visited on August 5, 2021).
[18] World Trade Organization General Council, Implementation of paragraph 6.