Business Live recently reported that the Nobel prize-winning economist, Joseph Stiglitz joined a call from activists and researchers urging President Cyril Ramaphosa to revisit SA’s position on a compromise deal on a waiver on intellectual property rights for Covid-19 technologies. He says that the proposed compromise would prevent meaningful access to Covid-19 tests, vaccines and treatments.
SA and India originally proposed that the World Trade Organisation waive patents on Covid-19 vaccines, tests and treatments for the length of the pandemic to allow for the large-scale manufacturing of generics versions. More than 100 countries initially backed the original plan, but the USA, New Zealand and Australia have since changed their position to supporting a waiver solely for vaccines.
Naturally, pharmaceutical companies that hold patents on Covid-19 vaccines and treatments have opposed the proposed waiver. The purpose of IP protection is to encourage technology development and to incentivise inventors to develop new technologies. However, this incentive arrangement becomes contentious when people’s lives are weighed up against the right of an inventing party to monopolise its technology and leverage its rights against the needs of the public. A humanitarian consideration is undoubtedly relevant in the case of Covid-19.
The compromise proposes that the IP waiver should only apply to the subject matter required for the production and supply of COVID-19 vaccines for a period of up to five years and does not include COVID-19 treatments or tests. This, as well as a time limit on the waiver, should provide technology owners some consolation. The activists and researchers, however, have called for this compromise to be rejected.
Negotiations may take a while to finalise. In the interim it should be noted that the legislation in South Africa does provide for compulsory licenses which can be procured by means of a court application. The compulsory court ordered license would provide someone the right to use the technology protected by the patent. This does not necessarily mean that the licensee won’t pay anything to the licensor, but the court may make a decision regarding the terms of such license.
These provisions are notoriously difficult to enforce in a court, and court proceedings in relation to compulsory licenses have yet to be successful in South Africa.
Section 56 of the Patents At 57 of 1978 provides that any interested person who can show that the rights in a patent are being abused may apply to the commissioner for a compulsory license. In particular, section 56(2)(e) states that: “The rights in a patent shall be deemed to be abused if – the demand in the Republic for the patented article is being met by importation and the price charged by the patentee, his licensee or agent for the patented article is excessive in relation to the price charged therefor in countries where the patented article is manufactured by or under licence from the patentee or his predecessor or successor in title.”
In addition, section 56(2)(c) states that: “The rights in a patent shall be deemed to be abused if – the demand for the patented article in the Republic is not being met to an adequate extent and on reasonable terms”.
In the case of Covid-19 vaccines and treatments, there is scope for an argument that the demand for the patented items is not being met; but in South Africa the reluctance to get vaccinated supplies a counter to the argument. Yet, for all the other patents related to the vaccine (such as medical diagnostic devices etc.) it could serve as a basis for an application for a compulsory license. Additionally, in terms of section 56(2)(e), arguments could be made that the price charged for the products is much greater than in other countries.
A central issue with the application of a compulsory license provision is that someone that would like to exploit the patent must show that the patent owner is abusing its rights – a difficult task in most circumstances, because the court will ask what qualifies as an adequate extent with reference to the working of a patent on a commercial scale.
However, more importantly, S56(2)(d) provides that the right of the patent will be deemed abused if the Licensor refuses to provide a license on reasonable terms, the trade or industry of any person or the establishment of any new trade is being prejudiced and it is in the public interest that a license should be granted. The argument would be that engagements between patent holder and a prospective manufacturer have failed and then based on public interest bring a court application to obtain a compulsory license based on terms provided by the court (payment of a reasonable royalty or license fee).
The proposed IP waiver may be a good thing from a humanitarian perspective, but at the expense of commercial freedom. If the IP waiver is not granted then, subject to the failure of negotiations, a prospective manufacturer could approach a court for a compulsory license. An impossible task? Perhaps. In the words of Andy Murray; “it is not the opponent you fear, it is the failure itself, knowing how near you were but just out of reach.”
