Nowadays the sphere of healthcare is becoming one of the mostly discussed because of a mass spread of the coronavirus pandemic (also COVID-19). Confirmed cases of COVID-19 around the world have passed more than a 2.4 million. As the disease is continuing to surge the World Health Organization is warning that there are no specific vaccines or treatments for COVID-19 as for today. However, there are many ongoing clinical trials evaluating potential treatments and developing drugs conducted by different laboratories in developed countries.
All these clinical trials, researches and developments are very high-priced. No pharmaceutical company would invest billions of dollars to bring a new drug to the market if faced with the prospect of instantaneous competition from manufacturers of low-priced copies. In absence of patent protection or some other form of exclusivity, a generic competitor can bring a bioequivalent product to market once the innovator has secured regulatory approval and established a demand for the product.
Therefore, it is obvious that patent protection is necessary for pharmaceutical drug innovation, since it helps to keep generics at bay for a limited time, allowing the innovator to charge a price sufficiently high to recoup research and development costs. Patents play a critical role in incentivizing the research, development, testing, and ultimately commercialization of follow-on pharmaceutical innovation.
However, if we are talking about the global infection such as the coronavirus pandemic that infected more than a 2.4 million people and killed more than 165.000 people life-saving vaccines or treatments should not become exclusively a tool of commercialization of the innovator. So in case of creation a vaccine, setting a high price for it will definitely restrict accessibility for countries that do not have enough financial resources to supply hospitals with the required quantity of such a vaccine.
In order to reduce the price of patented pharmaceuticals and to make medicines more affordable in such cases, the special mechanism of compulsory licensing seems to be most common practice.
Compulsory licensing legislation in Russia
Compulsory licensing occurs when a government allows someone other than the patent holder to produce the patented product without the consent of the patent holder. Russian legislation establishes certain grounds for compulsory licensing with relation to circumstances of exceptional nature such as defense and national security interest, dependent patents, or non-use of the patent.
The following means of compulsory licensing are established by the Articles 1360 and 1362 of the Civil Code of the Russian Federation.
- Article 1360 of the Civil Code of the Russian Federation allows the Russian Government to grant permission to the use of the patented invention in the interests of defense and national security. Use of such permission anyway requires notifying the patentholder and paying him an adequate compensation.
Moreover, in November 2019 the amendments to Article 1360 prepared by the Federal Antimonopoly Service were submitted to the State Duma of the Russian Federation. It is proposed to provide the Russian Government with an opportunity to grant the aforenamed permission in some cases of emergency. Particularly, in case if it is necessary to protect life and health of citizens. These amendments also say that the Government establishes methods of calculating the compensation and timelines of its repayment. However, these changes still have not passed the first hearing in the State Duma.
- According to Article 1362 of the Civil Code of the Russian Federation a compulsory license may be granted if any of the following conditions are met:
- an invention is not used or is insufficiently used by the patentholder for a long period of time; or
- a holder of a “dependent patent” cannot use the patented invention without infringing the rights of another patent holder.
In both cases, a company applying for a license has to try, within a reasonable period of time, to negotiate a voluntary license with the patent holder on reasonable commercial terms. Only in this situation a compulsory license may be issued, and, even then, the patent holder has the right to receive an adequate compensation.
Until recently there have not been any real cases on compulsory licensing in the Russian Federation.
The first precedents of granting the mandatory license to a dependent patent
Nativa v. Celgene International Holdings Corporation
The first case happened in 2018, when the Moscow City Commercial Court fulfilled a claim made by a local generic company Nativa and granted a license to use a patented drug of an American pharmaceutical producer Celgene International Holdings Corporation in connection to a cancer drug named Lenalidomide-Nativ. The drug is used for the treatment of leprosy, tuberculosis and AIDS.
Nativa tried to contact Celgene for a conduction of licensing agreement to produce and sell the generic version of the original drug on the Russian market. However, Celgene did not respond. As a result, Nativa claimed for a compulsory license based on the argument that it owns a dependent patent.
The court determined that Nativa is a patent holder of the dependent invention. Also, it was identified that Nativa’s product has significant economic advantages over the originator’s invention due to the exclusion of certain stages from the preparation process. As the result the court made the judgement to grant non-exclusive license to Nativa on the grounds of economic development in public interest.
However, at the later stage of proceedings in the Intellectual Property Court parties concluded a settlement agreement establishing that Nativa could not use the issued compulsory license or claim for it in future.
Nativa v. Sugen LLC and Pharmacia & Upjohn Company
On February 2019, the Moscow City Commercial Court granted the second compulsory license to Nativa for the use of another drug named Sunitinib protected by the Eurasian patent co-owned by Sugen LLC and Pharmacia & Upjohn Company. Both of these patent holders belong to the pharmaceutical corporation Pfizer. The claim of Russian generics company Nativa was also based on the ownership of a dependent patent that cannot be exploited without infringing the patent of Sugen LLC and Pharmacia & Upjohn Company.
The originators Sugen LLC and Pharmacia & Upjohn Company tried to appeal against the issued compulsory license, but all courts of higher jurisdiction rejected such appeals. It was also established at the level of the Supreme Court of the Russian Federation that Nativa’s actions may not be construed as an abuse of law. So that the first precedent was finally established.
It is interesting that the legal action has been primarily began under Sugen LLC and Pharmacia & Upjohn Company claim to protect these companies against infringement. Only after that Nativa asked for the compulsory license in this case using a counter-claim.
The analysis of existing cases demonstrates that a court could a grant compulsory license to a generic, where the following conditions are met:
- the generic protected by a dependent patent;
- a dependent patent constituted a significant technical achievement; and
- a dependent patent has substantial economic advantages.
As said above, the compulsory license may be also issued due to insufficient use of the patent. Russian court practice still not contain such cases. Moreover, it is difficult to use such a model in situation with COVID-19 as well as this model requires insufficient use during a long period of time (up to 4 years).
To sum up, applicants seeking patent protection in Russia should take into account that the granting of compulsory licenses in Russia is increasingly becoming a reality. Now that Russian courts have started granting compulsory licenses to pharmaceutical companies, it should be treated as impetus for all other generic producers development. As we have seen in case with Pfizer companies, a compulsory license may be counter-claimed in case where an originator asks court for protection against the infringement.
Getting back to the subject of COVID-19 spreading, it can be expected that countries which jurisdictions have compulsory licensing to patented medicines may involve steps to circumvent intellectual property rights in the coming months to ensure affordable access to key medical goods, including ventilators, diagnostic tests and any COVID-19 drugs or vaccines that are brought to the market. This will be especially the case if innovators will ask for an unfair price for new COVID-19 drugs or vaccines.
In case if the amendments to Article 1360 of the Civil Code of the Russian Federation will take effect soon, the Russian Government will be also able to implement its extraordinary discretionary capacity.
Originators should also take into account that in emergency some actions cannot be construed as the infringement. For instance, Article 1359(3) of the Civil Code of the Russian Federation says that use of an invention in emergency is not a violation, if the rightsholder is notified and granted an adequate compensation.
Probably, we will see a new round of patent disputes, when countries will pass through the coronavirus pandemic.