IP LAW BUGLE

JUNE 2018 | ISSUE 21

TABLE OF CONTENTS

RECAP: AIPF Breakfast at the INTA Annual Meeting

Compulsory Licenses in Latin America

2018 Annual Meeting: Early Registration Available Now

WELCOME, NEW MEMBER FIRMS!

The AIPF is pleased to welcome the following member firms to the association:

Simoes Intellectual Property

Brazil

Advance Partners IP Law Firm

Ukraine

Gardner Groff
Greenwald & Villanueva, PC

United States

Grocer and Grocer - Intellectual Property Attorneys

Groser & Groser

India

Macpherson Kelley

Australia

Magellan IP

Brazil

RECAP: AIPF BREAKFAST AT THE INTA ANNUAL MEETING

The AIPF held its Annual Breakfast at the INTA Annual Meeting on Monday, May 21, 2018 at the Sheraton Hotel in Seattle, WA.

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The AIPF breakfast offered attendees the opportunity to network with current and prospective members; and, featured over 60 current and prospective members from Australia, Canada, China, Colombia, Germany, Mexico, and more!

COMPULSORY LICENSES IN LATIN AMERICA - FROM THE COLOMBIAN AND BRAZILIAN PERSPECTIVES

By Monica Guevara, OlarteMoure & Asociados, & Igor Simoes, Simoes Intellectual Property

According to the World Trade Organization (WTO), a compulsory license (CL) is generally defined as a process which ends up “when a government allows someone else to produce a patented product or process without the consent of the patent owner or plans to use the patent-protected invention itself” (https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm).

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) includes some flexibilities to the right provided by a patent application, one of which is CLs. In particular, Article 31 of TRIPS regulates the use of others without the authorization of the right holder, providing a general framework that each of the Member countries has to comply when regulating this process. For example, the second provision of article 31 states that prior to the CL, said new user (person or company) has to have tried (made efforts) to obtain authorization (i.e., a license) from the patent holder on reasonable commercial terms. However, the same article states that this requirement may be waived “in the case of a national emergency or other circumstances of extreme urgency or in cases of public noncommercial use.”

Developing Country Members of TRIPS have used this flexibility in cases related to patented pharmaceuticals, in particular, taking advantage of the broad discretion in TRIPS when defining a national emergency or circumstances of extreme urgency and public interest. We will briefly review two of these countries: Colombia and Brazil, where CLs have been in the spotlight:

Colombia

Compulsory licenses are regulated in Colombia by Andean Law (which also governs in Peru, Bolivia and Ecuador). Andean Decision 486 contemplates four grounds for granting a CL:

Non-working: a CL is viable when the patent has not been worked in Colombia for three years following grant of a patent or four years following filing of a patent application, whichever is longer, or if working of the patent has been suspended for over one year, unless the patent owner is able to provide a valid reason for its failure not to work the invention (such as, for example, force majeure or an act of God). Additionally, a CL will only be granted if the third party applying for the license has made an effort to obtain a license from the patent owner on commercially reasonable terms and such efforts were not successful (Articles 61-64 of Decision 486).

Public interest, national emergency, extreme urgency: This ground requires a previous declaration of the existence of a public interest (a DPI), an emergency, or other national security considerations. Of this subset of grounds, public interest is perhaps the fuzziest and has been the only one recently used in CL requests. The DPI should explain what the public interest being affected by the specific patent that merits issuing a CL and how the CL will resolve the situation. In the case of pharmaceutical patents, the DPI is issued by the Ministry of Health (MoH) following a regulated procedure that allows the intervention of the patent owner and interested third parties, typically the petitioner and other patient NGOs. Once the DPI is made, the case is handed over to the Colombian Patent Office (CPO), who will specify its duration, the scope of the CL and the compensation to be paid to the owner (Article 65 of Decision 486). Subsequently, interested licensee candidates may file requests before the CPO in order to have a CL assigned.

Market abuse: This case is for situations where the patent owner’s practices in the market are deemed to be detrimental to the exercise of free competition and that a grant of CL will correct the situation. Article 66 of Decision 486 states that these practices should constitute an abuse of a dominant position in the market. The CPO will issue the CL ex officio or at the request of a third party based on a prior finding by the national antitrust authority.

Cross-license situations: In this case, a patent owner requests the CPO to issue a CL if the exploitation of its patent (the “first patent”) requires a license of another patent (the “second patent”), but the owner of the first patent has been unable to obtain a license of the second patent on commercially reasonable terms (Article 67 of Decision 486). There are three additional conditions for CLs issued under this ground:

the invention claimed in the second patent must constitute an important technical advance of considerable economic significance in relation to the invention in the first patent;

the owner of the first patent is entitled to a cross-license on reasonable terms to use the invention claimed in the second patent; and,

the license authorized in connection with the first patent is non-assignable except when the second patent is assigned.

Over the past 10 years, three CL investigations have started in Colombia, but no CL has ever been granted. All three cases relate to pharmaceutical products and have received important coverage by the media. In the first case in 2009, Abbott´s HIV product KALETRA, the MoH rejected the DPI arguing the price was per se reasonable because the product was covered by price control and no access issues were evidenced (ABBOTT nevertheless voluntarily dropped its price). In the second case in 2016, Novartis’ GLIVEC, the MoH issued a DPI, but not for CL purposes. Instead, DPI was used to implement a special price control for GLIVEC alone. This new price control methodology involved finding the cheapest generic in the region and forcing Novartis to sell at that price. Litigation against the DPI is ongoing, and in the meantime the Colombian government modified its regulations to prevent the MoH from implementing measures different from a CL after issuing a DPI. Finally, in the most recent case in 2017, the MoH opened a DPI investigation against – as of yet apparently unidentified – patents covering direct-acting antivirals for the treatment of Hep-C. This investigation is ongoing.

Brazil

Current Patent Law No. 9,279/96 has introduced, in addition to non-working of a patent due to lack of local manufacture, three situations where a compulsory license can be requested, such as: (i) abuse of economic power; (ii) public interest; and (iii) patent dependency, provided the subject matter of the dependent patent constitutes a substantiated technical advance in relation to the earlier patent. Obviously, the practical aspects of (i) and (ii) will depend on the rules and case law to be established by the Council for the Defense of the Economy, which is empowered to examine anti-trust disputes and compulsory license requests. CL provisions are discussed in Articles 68–74 of Law No. 9,279/96.

With the advent of the current Patent Law, the question of patent working and the granting of compulsory licenses have spurred a lot of uncertainties. In theory, the patentee should exploit the subject matter of his patent within Brazil to ward off applications for compulsory licenses, except when the non use can be justified on the grounds that it is economically non-viable, in which case importation will be admitted. The assessment of lack of economic viability may be to some extent a subjective issue and a finding would have to be made by public authorities, which are qualified to judge these matters.

On the other hand, a patentee who supplies the domestic market only via importation could theoretically also be penalized by the provisions of item 4 of Article 68 of the current Patent Law which states that if a CL is granted the country will also permit third parties to import the product as long as it has been made according to the respective process or product patent and is put on the (world) market with the patent owner’s consent.

A patentee who does not work his patent could be theoretically subject to a CL after three years have expired from the patent grant. Even so, the compulsory license request would be subject to an analysis and would not be granted if the patentee can point to “legitimate reasons” for not working the patent. The law does not provide any explanation as to what these reasons might be.

Accordingly, it is understood from the provisions of the law that parallel imports will be permitted in the event that importation substitutes local manufacture (item 1 of paragraph 1 of Article 68 of the law) and when the compulsory license holder imports the subject matter of the patent (paragraph 3 of Article 68 of the law). These provisions reflect a clear disadvantage in relation to the patentee who does not take any steps to work his invention, whether by local manufacture whether by importation.

Compulsory licensing, in fact, has been extremely rare. There have been just three cases of issuance of a CL in the last 35 years. The authorities have, however, used the compulsory license provisions as a threat. Article 71 of the law establishes that in public situations of national emergency or where public interest has been declared by an act of the Executive Branch, a temporary non-exclusive compulsory license for exploitation of a patent may be granted “ex-officio.”

An important case in Brazil was the CL issued to Efavirenz, a patented drug from Merck Sharp & Dohme. AIDS patients receive the medicaments directly from the National Program, free of charge. Before declaring the CL of the patents directed to the Efavirenz, the Brazilian Government started negotiating reduced prices on November 2006 with Merck Sharp & Dohme.

During the negotiations, MSD proposed a reduction of only 2% in the price of the drug, and the Ministry of Health considered it was not satisfactory, given the reductions announced by the MSD itself regarding the improvements in its production process, the prices practiced in the international market, as well as the incompatibility with the increasing consumption of Efavirenz in Brazil.

The Brazilian Government asked MSD to reduce the price of the drug to the same level as that offered to Thailand. This proposal was not accepted by MSD. Thus, due to the difficulties of negotiation with MSD, the CL was then issued on April 24, 2007.

MEMBER FIRM NEWS

Antequera Parilli & Rodriguez opts for growth

AIPF congratulates member firm, Antequera Parilli & Rodriguez, on their successful merge with Venezuelan firm Markven Propiedad Intelectual on May 1, 2018. The joined firms will be known as Antequera Parilli & Rodriguez.

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