Patent pools are private arrangements that enable participants to operate under one another others’ patent rights, to manage and administer the pooled rights on a centralized basis, and often to grant licenses of the pooled patents to third parties, with the proceeds split among the pool members according to an agreed formula. Patent pools have been around for a century in industries ranging from oil refinement to aircraft to semiconductors to digital media. In all of these cases, pools have enabled the efficient consolidation of patents in a manner that has facilitated licensing and commercialization.
Historically, however, patent pools have not enjoyed much commercial success in the biomedical sector. As I have written previously, “Several factors could explain the absence of pooling in this arena: the need for at least some market exclusivity in an environment with extremely high costs of product development, clinical trials and regulatory approval; patent holders’ desire to retain control over their assets; and concern over compromising commercial secrecy by collaborating with others.”
Patent pools have also been suggested as mechanisms to address more acute public health crises such as disease outbreaks. Patent pooling structures were actively discussed and considered in response to the SARS outbreak of 2002-03, the H5N1 influenza outbreak of 2005, and the H1N1 influenza pandemic of 2009 (see, e.g., these papers by Hillary Greene and Dana Beldiman). Yet despite the perceived need for aggregation of distributed patent rights in order to combat these diseases, patent pools were never formed.
One reason that patent pools may not have successfully formed in these areas may relate to antitrust law. A patent pool necessarily includes a variety of patents held by different owners. But when a pool aggregates rights covering technologies that may be substitutes for one another, such as patents covering different types of vaccines, innovation could be reduced (i.e., why try to develop an improved vaccine when all vaccines are licensed under the pool?). On the other hand, when pooled patents are complementary (e.g., several patents covering aspects of the same vaccine), pools are viewed as increasing efficiency and enhancing innovation. It is for this reason that most antitrust enforcement agencies concur that the patents included in a pool should generally be complementary and not substitutes for one another.
Yet the exercise of determining which patents are complementary and which patents are substitutes is not a trivial one. Various studies have estimated the cost of this “essentiality analysis” to be in the range of US$10,000 per patent, a cost that can easily reach millions of dollars in heavily-patented areas. Patent pools involve other costs, as well. Robert Merges and Michael Mattioli have estimated the set-up costs of two major patent pools relating to data compression standards — MPEG Audio and HVEC – at US $7.8 million and $4.8 million, respectively, with annual operating budgets in the range of $600,000 and $2 million.
In addition to formal pooling arrangements, some have sought to address public health needs through more flexible structures. For example, in 2010 the Unitaid arm of the United Nations World Health Organization (WHO) created the Medicines Patent Pool (MPP). MPP’s mission is to aggregate patents, clinical trials data and other IP relating to HIV/AIDS, Tuberculosis and Hepatitis-C medications and make them available at low or no cost to manufacturers that commit to produce and sell drugs to users in low-income countries.
Despite its name, the MPP is not a patent pool, as that term is commonly understood. Rather, it is a clearinghouse or intermediary that obtains inbound licenses from willing IP holders and then sublicenses those rights to generic drug manufacturers operating in developing countries. These licenses, which may be royalty-bearing or royalty-free, are generally available on an a-la-carte basis, and do not necessarily aggregate all of the rights licensed to MPP (thus avoiding some of the antitrust issues and up-front costs described above). To date, several significant patent holders, including AbbVie, Bristol-Myers Squibb, Gilead Sciences, Pfizer, ViiV Healthcare and Johns Hopkins University, have licensed IP to the MPP, which has in turn granted twenty-two sublicenses to generic drug manufacturers for distribution of products in the developing world.
Given this background, advocates have proposed that a patent pool or MPP-like clearinghouse be formed to combat the Covid-19 pandemic. In March 2020, the President and Health Minister of Costa Rica requested that the WHO “undertake an effort to pool rights to technologies that are useful for the detection, prevention, control and treatment of the COVID-19 pandemic.” According to the request, the proposed pool
“should include existing and future rights in patented inventions and designs, as well rights in regulatory test data, know-how, cell lines, copyrights and blueprints for manufacturing diagnostic tests, devices, drugs, or vaccines. It should provide for free access or licensing on reasonable and affordable terms, in every member country.”
The Costa Rica proposal is an ambitious one, encompassing not only patents, but also data, know-how, cell lines, copyrights and designs, all of which are crucial to the fight against Covid-19. It calls for “free access or licensing on reasonable and affordable terms” of the resulting products. The ability to charge for rights granted under the pool may be intended to persuade commercial firms to contribute their intellectual property to the pool. Based on experience in the high technology sector, the determination of “reasonable and affordable terms” could be complex and require time to work out, though MPP has done this successfully with respect to some non-pediatric drug licenses.
The proposed WHO pool has been endorsed by the Director-General of WHO, as well as Unitaid, the organization that formed and funds the MPP. As such, it is likely that such a pool could find a home within the UN family, and perhaps within MPP itself. Though not earmarked specifically for an IP pool, Unitaid’s Board has recently approved funding of US$30 million for work relating to Covid-19. And in anticipation of such a pool, MPP’s Board has authorized the “temporary expansion of MPP’s remit to include any health technology where licensing could improve access for low- and middle-income countries.” Though this expansion is welcome, it appears that many developed countries in North America, Europe and Asia, where Covid-19 is having a significant impact, may not be intended beneficiaries of the proposed IP pool. Given the global nature of the current pandemic, such an omission would be unfortunate.
An IP clearinghouse or pool administered by a United Nations agency, particularly if it is truly global in scope, could alleviate many patent-related impediments to the development, production and distribution of vaccines, diagnostics, therapeutics and equipment in the fight against Covid-19. As such, it would complement existing efforts such as voluntary IP pledges that have already freed thousands of patents for use in this public health crisis (see opencovidpledge.org). To ensure that such a pooling effort is effective, however, the WHO must act quickly and decisively in defining the details of the proposed arrangement and in persuading patent holders in both the public and private sectors to join this worthwhile effort.
Update: On April 13, 2020, an official representing MPP confirmed, in a private email, that MPP is authorized to grant global licenses with respect to Covid-19 technologies notwithstanding the more limited scope of its latest Board resolution on this topic.
