7 February 2018

What’s the point of a patent if it doesn’t protect?


One of the fundamental purposes of a patent is to align the legal property rights of patent-holders with their moral claims to ownership of their intellectual property. You have an intellectual property right because the intellectual property belongs to you.

But there is a second basic purpose of a patent. The alternative to a patent system is not really one in which there is no intellectual property protection. Rather, the alternative is that inventors attempt to protect their intellectual property by keeping the details secret. A patent, by contrast, is an open statement of the details of an invention that allows others to study it, to see how it works, to see how best they can use it, and to see how they might improve upon it. In exchange for revealing the details of an invention in this way, a patent-holder is granted exclusive rights for a set time period.

But how far should those rights extend? Other companies or individuals may not be able to sell products based on your invention without your permission (which will presumably come at a price), but are there other things they can do?

For example, at some point your patent protection will expire. In the EU a patent lasts 20 years, though for some products (eg, pharmaceuticals) you can secure extensions. When your patent expires, other producers can enter the market and use your invention to sell products. But in the case of some products, it isn’t simply your patent that stops them from selling. They also need to do various safety and other tests on their products, to be licensed to sell (eg, if they are selling pharmaceuticals and require a marketing authorisation from the relevant health agency). So should you be able to stop those that will in the future compete with you from using your invention to obtain the relevant licences?

Intuition would suggest not. After all, part of the point of a patent is to allow others to inspect and learn from your invention and discover how best to use it. A natural part of that would seem to be the carrying out of relevant tests so as to secure a licence to produce. And indeed in Europe, Canada and the United States there is something called the “research exemption”, which allows the performing of research and tests, in order to prepare for regulatory approval, for a limited period in the run-up to patent expiry.

What other exemptions might be appropriate? Until 2001 the Canadian Patent Act allowed for what is called a “stockpiling waiver” — that is to say, a rule that said your competitors were allowed to manufacture products that use your patent before the patent term expires, provided they are doing so only for the purposes of stockpiling products so as to be ready to sell straight away once the patent does actually expire. Another possible exemption sometimes suggested is an “export waiver” — ie, a rule that says others are allowed to manufacture products that use my patent, provided that is only for export to countries where my patent has already expired.

The European Commission recently published a study looking at the impacts, if stockpiling and export waivers were to be introduced for pharmaceuticals. I don’t see how it could be feasible to change the protections provided by a patent for pharmaceuticals without it also changing for patents on other products, such as IT. We aren’t really going to have special “pharma patents” that confer different rights from other patents. Either everything has stockpiling and export waivers or nothing does.

It should be fairly obvious that stockpiling and export waivers are different in nature from the research exemption. The research exemption reflects the fundamental nature of a patent as a promoter of research, which is what I sign up for when I apply for a patent instead of keeping my invention secret. By contrast, stockpiling and export waivers are straightforward cases of others being allowed to use my intellectual property without my permission.

The introduction of stockpiling and export waivers would effectively mean a reduction in patent protection, so instead of a patent lasting for 20 years (or a little longer for products that can get a patent extension), a patent would last with full effect for a bit less than that, and then the rights would taper away towards the end.

We can, of course, change patent rights and effective patent terms. We did that with patent extension systems and we could do the same thing with stockpiling and export waivers. But we should expect the impacts to be rather profound and widespread, across many sectors. So if we are going to change things, we had better have made sure we’ve thought through all the impacts carefully, and convinced ourselves that the benefits will be worth the costs.

recent Europe Economics report claims that the European Commission’s study is not adequate for justifying such a profound change. It claimed to identify a series of methodological weaknesses in the Commission’s analysis. It would take us too far into the detail to consider all of the claims. But we can focus on a couple, to illustrate.

First, the European Commission’s analysis assumes that there would be no impacts outside the pharmaceuticals sector. That does not seem plausible. Even in the unlikely event that some special new “pharma patent” were introduced, researchers and inventors in other sectors would rightly expect there would be pressure for their patents to be changed as well. There would inevitably be profound effects across the economy, and the Commission has no analysis to show what the balance of advantage or disadvantage of these would be outside the pharmaceuticals sector.

Second, the Commission suggests that one of the main reasons for a stockpiling waiver is that EU generics producers (ie, producers of products for which the patents have expired) do worse, relative to non-EU producers, than they might — ie, that the point is not really to advantage EU generics producers at the expense of EU patented medicines producers but, rather to level the playing field between EU and non-EU generics producers. But the Commission fails to offer any good evidence that EU generics producers do not already do as well, relative to non-EU producers, as is feasible.

Errors like these mean that the Commission’s case for changing the nature of patent protections is weak. Stockpiling and export waivers, unlike the research exemption, run against the nature of what patents have been up to now, and introducing them would have a potentially profound effect across many sectors. If we are going to do that, we arguably ought to consider other issues at the same time (such as whether patent lives should be longer in general), to make an overall judgement in the round. And if we are going to do that, we ought to have compelling and robust reasons to believe the benefits will outweigh the costs. As things stand, the Commission’s analysis does not provide them.

Andrew Lilico is an economist and political writer