Brookings Analyst Criticizes USG For Ensuring That Foreign Governments Protect US Constitutionally Recognized Private IP Rights Abroad

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/17/EDR1V0LCD.DTL


U.S. expanding the law - domestic and foreign - to benefit corporations


By Ben Klemens


Sunday, February 17, 2008


As a U.S. taxpayer, you may be contributing to fewer cheap drugs on international shelves. Public dollars support the Office of the U.S. Trade Representative, the trade agency with authority to pressure foreign governments to change their domestic intellectual property laws. As such, the agency actively presses for laws that would keep generic drugs out of markets worldwide.


[IS THIS COMMENTATOR SUGGESTING THAT THE US TRADE REPRESENTATIVE INSIST THAT FOREIGN GOVERNMENTS WEAKEN THEIR DOMESTIC INTELLECTUAL PROPERTY LAWS SO THAT THEY ARE ABLE TO ‘TAKE’ U.S. HELD PATENTS, COPYRIGHTS AND TRADE SECRETS WITHOUT PAYING ADEQUATE AND FULL COMPENSATION FOR THEM, CONTRARY TO THE FIFTH AMENDMENT OF THE BILL OF RIGHTS TO THE U.S. CONSTITUTION?? IS THIS COMMENTATOR ADVOCATING THE GIVE-AWAY OF U.S.-OWNED INTELLECTUAL PROPERTY RIGHTS AS A FORM OF TECHNOLOGY TRANSFER IN ORDER TO IMPROVE AMERICA’S IMAGE ABROAD??]


Congress is considering legislation to create a separate executive branch office dedicated to using government resources for lobbying other countries to change their laws, sometimes exclusively to benefit certain U.S. companies.


That's a bad idea for patients here and abroad, because it would give the U.S. government more power in an area where it should instead have less.


[DOES THIS COMMENTATOR FAVOR THE EXERCISE OF MORE GOVERNMENT POWER TO DETERMINE HOW DRUGS SHOULD BE MADE, HOW THEY SHOULD BE PRICED, HOW MUCH PROFITS DRUG COMPANIES SHOULD MAKE, JUST AS THEY DO IT IN EUROPE, CANADA, BRAZIL AND OTHER SOCIALIST COUNTRIES??? DOES THIS COMMENTATOR ADVOCATE IN FAVOR OF SOCIALIZED MEDICINE AND UNIVERSAL HEALTHCARE FOR ALL AT THE EXPENSE OF NEW HEALTHCARE RESEARCH & DISCOVERIES AND PRODUCT INNOVATIONS??]


The international intellectual property system is based on an ingenious 1994 international treaty: Rather than establishing an unwieldy international copyright and patent office, the agreement merely stipulates that every signatory country must have domestic copyright and patent systems that meet certain basic requirements.


[THIS COMMENTATOR IS OBVIOUSLY UNAWARE OF THE CONSTITUTIONAL OBLIGATION OF BOTH THE U.S. CONGRESS AND THE PRESIDENT TO PROTECT THE PRIVATE PROPERTY RIGHTS OF U.S. CITIZENS, WHETHER TANGIBLE OR INTANGIBLE, NO MATTER WHERE THEY ARE LOCATED. HE ALSO IS UNAWARE THAT THE WTO TRIPS AGREEMENT INCORPORATES AND FURTHER ENHANCES THE PROTECTION OF INTELLECTUAL PROPERTY (PATENTS & COPYRIGHTS) ALREADY RECOGNIZED AND PROTECTED UNDER THE TERMS OF TWO WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO) AGREEMENTS, SO THAT SUCH PROTECTIONS ARE MORE CLOSELY ALIGNED WITH THOSE PROVIDED FOR UNDER U.S. DOMESTIC LAW. THE DECISION NOT TO ESTABLISH A SUPRANATIONAL WORLD INTERNATIONAL COPYRIGHT AND PATENT OFFICE, WHICH THIS COMMENTATOR FAVORS, WAS CERTAINLY A PRUDENT ONE, IN ORDER TO MAINTAIN U.S. SOVEREIGNTY.]


The trade agency's interpretation of what other countries' domestic laws need to cover expands beyond the broadest definitions within U.S. law. To give one example, data gathered during clinical trials of new drugs are not protected by copyright, patent or trademark in the United States. But as a rule of bureaucratic procedure, the Food and Drug Administration restricts use of test results finding that a brand-name drug is safe when considering the safety of identical generic drugs. Even though it is hard to argue that this FDA rule is an intellectual property law, the trade representative is using its authority to press for comparable rules restricting the approval process for generic drugs in other countries.


[THIS COMMENTATOR OBVIOUSLY IS UNAWARE OF THE COMMON LAW NOTION OF TRADE SECRETS WHICH CONSTITUTE A RECOGNIZED AND ENFORCEABLE PRIVATE PROPERTY RIGHT UNDER THE LAWS OF MANY U.S. STATES. THUS, THE USTR AND FDA ARE MERELY PROTECTING THESE SAME INTANGIBLE PROPERTY RIGHTS HELD BY U.S. CITIZENS FROM UNJUSTIFIED FOREIGN GOVERNMENTAL INTRUSION AND EXPLOITATION AND ‘TAKINGS’, CONSISTENT WITH THE PROVISIONS OF THE WTO TRIPS AGREEMENT, IN MUCH THE SAME WAY THAT SUCH RIGHTS WOULD BE PROTECTED AGAINST U.S. GOVERNMENTAL ACTION UNDER U.S. CIVIL AND CONSTITUTIONAL LAW. INDEED, THE FDA RULES PROSCRIBE THE TAKING OF TRADE SECRETS AND ACTUALLY IMPOSE CIVIL AND CRIMINAL PENALTIES ON GOVERNMENT EMPLOYEES FOR VIOLATING TRADE SECRETS. THUS, THE USTR AND FDA ARE NOT ACTING BEYOND THEIR LEGAL AUTHORITY BY ENSURING THAT FOREIGN GOVERNMENTS DO NOT VIOLATE U.S. CONSTITUTIONALLY PROTECTED PRIVATE PROPERTY RIGHTS.]


It doesn't take much sleuthing to follow the money back to the U.S. pharmaceutical manufacturers on the trade agency's advisory panel, who can maintain monopolist profits while a generic drug is blocked from the market in Guatemala, Malaysia or any of the dozen other countries that the trade agency is pressuring to adopt U.S.-style restrictions on generic drug approval.


[THIS COMMENTATOR IS ALSO ABLE TO TRACE NEW DRUG AND MEDICAL DEVICE DISCOVERIES AND INNOVATIONS BACK TO THE LIFE SCIENCES COMPANIES THAT INVESTED THE $$ AND EFFORT TO INVENT THEM AND SEE THAT THEY RECEIVE THE NECESSARY FEDERAL REGULATORY APPROVALS TO MAKE IT TO MARKET. PATENTS AND TRADE SECRETS ARE BY DEFINITION EXCLUSIVE PRIVATE PROPERTY RIGHTS OF TEMPORARY DURATION].


Proselytizing U.S. intellectual property law would be easier if we knew exactly what U.S. intellectual property law is, but many debates still rage in the courts and in the law journals. Is software patentable? Justice Breyer, Justice Stevens and the U.S. Patent and Trademark Office's semi-judicial board of appeals have clearly expressed that it is not. Yet the trade representative thinks it is, which is why a 2000 agreement with Jordan required that country to change its domestic laws to better accommodate the patenting of software, and its nonbinding reports find fault with countries whose patent systems do not allow software patents.


[THIS COMMENTATOR OBVIOUSLY WISHES TO PORTRAY THE U.S. AND GLOBAL INTELLECTUAL PROPERTY SYSTEM AS UNCERTAIN, UNCLEAR AND BROKEN INORDER TO RECOMMEND AN ALTERNATIVE TO THE PRESENT MARKET-BASED SYSTEM. THAT ALTERNATIVE WOULD ENTAIL CENTRALIZED GOVERNMENT SANCTIONED TOP-DOWN ESTABLISHMENT OF A HEALTH CARE MARKET SYSTEM THAT DETERMINES FOR INDUSTRY AND PATIENTS ALIKE WHAT IS NEEDED, HOW IT IS TO BE DEVELOPED, HOW IT IS TO BE ADMINISTERED AND HOW MUCH THEY SHOULD CHARGE/PAY FOR IT. THIS SOUNDS AN AWFUL LOT LIKE THE SOCIALIZED MEDICAL SYSTEMS CURRENTLY OPERATING IN EUROPE AND CANADA AND IN BRAZIL.]


The U.S. Trade Representative's treaties bind all parties to rewrite their domestic laws accordingly. That is, the agency can dictate how Congress is to write domestic law, and how federal courts interpret it, via its international treaties. We all want intellectual property law to evolve with the times, but every new treaty by the trade agency makes evolution a little more difficult.


[THIS COMMENTATOR OBVIOUSLY IS UNAWARE OF THE RELATIVE ROLES (BALANCE OF CONSTITUTIONAL POWERS AND OBLIGATIONS) BETWEEN THE LEGISLATIVE AND EXECUTIVE BRANCHES AS CONCERNS INTERNATIONAL TREATY NEGOTIATION, RATIFICATION AND ENFORCEMENT. IF THE U.S. CONSTITUTION RECOGNIZES AND PROTECTS U.S. DEVELOPED AND HELD PRIVATE INTELLECTUAL PROPERTY RIGHTS, BOTH WITHIN AND WITHOUT THE TERRITORIAL U.S., THEN EVERY NEW TREATY ENTERED INTO BY THE UNITED STATES MUST CONTINUE TO ENSURE THAT THESE CONSTITUTIONALLY PROTECTED PRIVATE PROPERTY RIGHTS ARE UPHELD ABROAD. ACTUALLY, THE INTERNATIONAL LAW OF INTELLECTUAL PROPERTY RIGHTS IS EVOLVING FOR THE BETTER UNDER SUCH PRINCIPLES, AND NOT FOR WORSE.]


HR4279, now pending in the House Judiciary Committee, would establish an Office of the U.S. Intellectual Property Enforcement Representative, spinning off intellectual property from the trade representative's portfolio into its own office, without repealing the agency's authority to negotiate other countries' intellectual property laws. The new office would have authority to define the scope of intellectual property as it sees fit, and it would have expanded ability to use the resources of other departments (the Department of Justice, the State Department, Homeland Security, state and local governments, and many others) in pressuring other countries to change their domestic laws accordingly.


[H.R. 4279, ENTITLED, THE “PRIORITIZING RESOURCES AND ORGANIZATION FOR INTELLECTUAL PROPERTY ACT OF 2007 – ‘THE PRO-IP ACT’”, IS INTENDED TO STRENGHTEN COPYRIGHT AND TRADEMARK PROTECTION AGAINST FOREIGN & DOMESTIC PIRACY. HOWEVER, IT MAY ACTUALLY GO BEYOND THE TENOR AND SCOPE OF CURRENT IP LAW TO PENALIZE NOT ONLY COMMERCIAL INFRINGERS BUT ALSO ORDINARY CONSUMERS WHO MERELY COPY ALREADY PURCHASED MUSIC CDS AND MOVIE DVDS FOR THEIR OWN PERSONAL USE, AT NO ECONOMIC LOSS TO THE COMPANIES.]


SEE, e.g.,: Paul Devinsky and Rita Siamas, “United States: House Proposes Creation Of An IP Enforcement Czar, Seeks Stronger Trademark And Copyright Enforcement”, McDermott, Will & Emery (Jan. 15, 2008) at: http://www.mondaq.com/article.asp?articleid=55962


The 1994 treaty on trade-related international property defines a simple base for copyright, patent and trademark, and it makes sense for the trade agency to hold countries to the basic framework. But our trade representative has gone well beyond that, to simply interpreting intellectual property as its corporate advisory boards wish, and then using the muscle of the U.S. government and the resources of U.S. taxpayers to press other countries into changing their laws to suit that interpretation. Congress needs to restrict the trade representative's expansive tendencies, instead of releasing what little rein is left.


[H.R. 4279 ARGUABLY REFLECTS THE CONCERNS OF THE MUSIC & ENTERTAINMENT INDUSTRY AND ITS FAILURE TO DEVELOP A NEW BUSINESS MODEL THAT CAN RESPOND AND HARNESS THE EVOLVING DOMESTIC MARKETPLACE. FOREIGN COPYRIGHT & TRADEMARK PIRACY, HOWEVER, POSES A SIGNIFICANT PROBLEM AND CERTAINLY RISKS FUTURE INDUSTRY REVENUES. BUT DOES THIS BILL PROVIDE THE BEST SOLUTION?]


Ben Klemens is a guest scholar in Economic Studies at the Brookings Institution. Brookings is a private nonprofit organization devoted to independent research and innovative policy solutions.


[WHILE AT BROOKINGS, MR. KLEMENS HAS ADVOCATED IN FAVOR OF OPEN SOURCE SOFTWARE, AMONG OTHER THINGS]


http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/17/EDR1V0LCD.DTL

This article appeared on page E - 5 of the San Francisco Chronicle

Silly Apologist-Analyst Recommends That America Give Away its Future IP-Based Economy to the World

http://www.brookings.edu/opinions/2006/0825trade_klemens.aspx


U.S. Patent Imperialism Hurts American Interests


August 25, 2006 —


The Patent Reform Act of 2006 (S.3818), introduced to the Senate floor on August 8, will entirely fail to reform patents. The bill makes important modifications to rules on filing and review of paperwork, but the Senate has chosen to overlook many serious problems with patents that cost consumers billions of dollars and embarrass the U.S. internationally.


Much of this excess cost and embarrassment comes as a result of a double standard between imports and domestic goods. All patent disputes may be tried in U.S. District Courts, but disputes over imports may also be tried at the International Trade Commission (ITC), a branch of the Department of Commerce. The ITC uses a broader definition of patent infringement than the district courts, meaning that an import may be found to infringe on a patent that it would not infringe upon if it were produced in the U.S. Such a double standard affects U.S. taxpayers and consumers, who have fewer choices and more monopolies with which to contend.


[THIS COMMENTATOR IS OBVIOUSLY REFERRING TO SECTION 337 OF THE TARIFF ACT OF 1930, WHICH PERMITS THE U.S. INTERNATIONAL TRADE COMMISSION (ITC) TO INVESTIGATE COMPLAINTS BROUGHT BY PARTIES IN ORDER TO DETERMINE WHETHER ALLEGEDLY 'PIRATED' IMPORTED ARTICLES SHOULD BE BARRED FROM ENTERING THE U.S. UNDER SECTION 337 THE ITC POSSESSES THE AUTHORITY TO EXCLUDE IMPORTS BECAUSE OF 'UNFAIR ACTS', 'UNFAIR METHODS OF COMPETITION' OR 'ACTS OF INTELLECTUAL PROPERTY INFRINGEMENT' COMMITTED IN CONNECTION WITH IMPORTATION. AS CONCERNS THE PROCEDURAL LIGITATION METHODS REFERENCED, THE COMMENTATOR IS OBVIOUSLY REFERRING TO A 1989 GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) PANEL DECISION WHICH FOUND THAT CERTAIN ASPECTS OF SECTION 337 HAD VIOLATED THE NATIONAL TREATMENT PROVISIONS OF THE GATT INTERNATIONAL TRADE LAW. THE URUGUAY ROUND OF TRADE NEGOTIATIONS PURSUANT TO WHICH THE WORLD TRADE ORGANIZATION WAS CREATED, ADDRESSED THESE VIOLATIONS. AS A RESULT, FOLLOWING U.S. ACCESSION TO THE WTO AGREEMENTS, CONGRESS IN 1995 ENACTED IMPLEMENTING LEGISLATION TO AMEND SECTION 337, CONSISTENT WITH THE NEW WTO REQUIREMENTS].


[THIS COMMENTATOR'S ARGUMENT APPEARS TO OBJECT TO SECTION 337 AS AMENDED, MUCH AS THE EUROPEAN UNION DID DURING 2000. SEE: UNITED STATES SECTION 337 OF THE TARIFF ACT OF 1930 AND AMENDMENTS THERETO Request for Consultations by the European Communities and their member States, WT/DS186/1 IP/D/21 18 (January 2000) AT: http://trade.ec.europa.eu/doclib/docs/2004/january/tradoc_114327.pdf ].


Over the past decade, there have been abundant examples of how patent law has been stretched too far to the detriment of U.S. consumers and manufacturers. The reader may recall the problems faced by the makers of the Blackberry, who faced a lengthy patent battle in domestic courts over software on its Canadian email servers. In hearing that case, the Court of Appeals for the Federal Circuit (CAFC) declared that if "control and beneficial use" of a device is in the U.S., then it is beholden to U.S. patent law. With this simple declaration, millions of web sites all around the world suddenly had liability exposure in U.S. courts.


In another example, Creative, Inc., claims that the iPod violates its patent on organizing songs by artist, album, and genre (U.S. patent #6,928,433). Since the iPod is made abroad, Creative sued Apple in domestic courts and petitioned the ITC to block their U.S. sale. On Wednesday, with the threat of an iPod ban looming, Apple paid Creative $100 million to withdraw its complaints.


And the dueling standards collide at a cost to the government, too. For example, Amgen, Inc., has a patent on Epogen, a drug that treats anemia in patients who are on dialysis for end-stage renal disease. Thanks to its patent, Amgen is the monopolist vendor of a life-saving drug—and it sets its price accordingly. Every year, Medicare pays over $1 billion for this drug alone.


[THIS COMMENTATOR TAKES THE IDEOLOGICAL POSITION THAT ALL INTELLECTUAL PROPERTY RIGHTS, ESPECIALLY PATENTS ON HEALTH CARE PRODUCTS AND DEVICES AND INFORMATION TECHNOLOGIES, CONSTITUTE ILLEGAL MONOPOLIES. THIS POSITION IS AKIN TO THAT ADVANCED BY SOME EMERGING ECONOMIES SUCH AS BRAZIL AND BY DEVELOPING COUNTRIES SUCH AS THAILAND.]


A Swiss pharmaceutical company, Roche, has a drug that would compete head-to-head with Epogen, and thus force down Epogen's price and possibly improve patient outcomes—except the drug is produced abroad. Roche's product is likely to be found to be a valid, non-infringing competitor to Amgen's patents and products in U.S. District Courts, but will have a harder time getting past the ITC's broader definition of patent infringement. As a result, Amgen may continue to bill Medicare at the full monopoly price.


Maintaining a separate definition of patentability for imports directly violates WTO treaties mandating non-discrimination. Other court-invented innovations in patent law also create a growing rift between the U.S. and the rest of the world that will be a liability for the U.S. in negotiations over trade and tariffs.


[THE U.S. CONGRESS AMENDED SECTION 337 TO COMPLY WITH THE WTO AGREEMENTS].


All of the rulings that have shaped patent law in the last few decades have come from the CAFC, a court founded in the early 1980s to resolve patent and trade disputes. It is heavily stocked with former prominent patent attorneys, so it no surprise that the CAFC has actively expanded the powers of patents well beyond pre-1980 limits.


[THIS COMMENTATOR TAKES ISSUE WITH THE FACT THAT A UNIQUE COURT (THE FEDERAL CIRCUIT COURT OF APPEALS WAS ESTABLISHED TO IMPROVE JUDICIAL EFFICIENCY AND ADJUDICATION OF PATENT DISPUTES) POSSESSING SPECIALIZED KNOWLEDGE IN INTELLECTUAL PROPERTY. OTHER IMPORTANT PIECES OF FEDERAL LEGISLATION AFFECTING PATENT RIGHTS WAS ENACTED TO IMPROVE, AND REMARKABLY IMPROVED, U.S. GLOBAL COMPETITIVENESS - NAMELY THE BAYH-DOLE ACT. ALSO THE HATCH-WAXMAN ACT WAS ENACTED DURING SUCH TIME. IT IMPROVED CONSUMER ACCESS TO GENERIC DRUGS].


Rather than striving to maximize innovation and economic benefits, the CAFC tends to rule via tortuously close readings of statute. Its ruling that established the separate ITC standard for patent infringement is based almost entirely upon a reading of the boilerplate phrase "for purposes of this title." Its statement regarding "control and beneficial use" is nowhere to be found in statute, but did build upon a prior CAFC divination—that the Congress of 1952 intended that software would one day be patentable.


Patent law has been expanded and forcefully exported by a single court, without oversight by Congress. Internationally, the courts' favoring of domestic producers over importers, and the CAFC's self-declaration that it has jurisdiction over any Internet-enabled computer in the world, has put U.S. trade negotiators in a weaker position and will hurt Americans in the long run. Domestically, it has created the usual problems associated with unfettered monopolies: prices rise, choices diminish, and consumers suffer.


Congress needs to take real action to explicitly establish a single standard for patent infringement regardless of the manufacturer's address, and to restore the scope of patents to where it was before the CAFC's unilateral expansions. The Patent Reform Act of 2006 is not enough.

Funny Financial Times Journalist Promotes Utopian 'Door' Prizes Over Patents

http://www.ft.com/cms/s/a4040a4e-c7bd-11dc-a0b4-0000779fd2ac.html


Cash for answers

By Tim Harford

Financial Times

January 25 2008

In 1737, John Harrison, a self-taught clockmaker from Yorkshire, stunned London’s scientific establishment by presenting an idiosyncratic solution to the most important and notorious technological problem of the 18th century. He was hoping to win a then-fabulous prize of £20,000 (about £5m today) for anyone who could devise a way for a ship’s navigator to determine its longitude and therefore its position at sea. Harrison’s approach was to build a clock that would keep Greenwich time faithfully; by comparing local time (measured using the position of the sun) with the time in London, the navigator would know how far east or west the ship had sailed. The theory was sound, but given the rolling of ships and changing temperature and humidity, the leading scientists of the day – including Sir Isaac Newton – reckoned that a sufficiently accurate clock would be impossible to build. Harrison proved otherwise.


The longitude prize, sponsored by the British government, was not unique. Prizes were also offered in France for a functional water turbine, and for a method of preserving food for Napoleon’s armies. The latter prize quickly inspired the tin can, more of a blessing than food snobs might acknowledge.


But such prizes then fell out of fashion. For commercial innovations, we now rely on patents to encourage and protect innovators. Basic research is funded not by prizes but by grants.


And yet two centuries after tinned fish hit the market, the way we look for solutions has come full circle. Governments, private foundations and even corporations are rediscovering the value of offering prizes for good ideas. Rather than paying for scientific and engineering effort as they have done for the past 200 years, idea-hungry patrons are returning to the 18th century, and paying for results.


The most famous innovation prize of this century, the $10m Ansari X Prize, was designed to promote private space flight. The pot went to Mojave Aerospace Ventures in 2004, after the successful flights of SpaceShipOne. And even the Ansari X Prize is dwarfed by a quasi-prize of up to $1.5bn that is about to be offered by five national governments and the Gates Foundation to the developers and suppliers of a more effective vaccine against pneumococcal diseases such as pneumonia, meningitis and bronchitis.

The prize, called an “advanced market commitment’’ or “advanced purchase commitment’’, takes the form of an agreement to subsidise heavily the first big orders of a successful vaccine. Given that the top companies in the UK’s powerful pharmaceutical industry spent little more than £5bn in 2006 on research and development, a $1.5bn prize should be taken seriously on hard-nosed commercial grounds alone.

And if formidable obstacles to setting the prize conditions can be overcome, the pneumococcal diseases contest could be followed by a malaria vaccine prize twice as big and an Aids vaccine prize that would be bigger still.


Prizes need not have such lofty ambitions. They can simply be a way of turning a solution into a commodity. One company, Innocentive, provides an exchange where “seekers’’ can offer cash to “solvers’’. Both sides are anonymous, which is one of the selling points of innovation prizes: they reward neither connections nor seniority, but solutions alone. Innocentive’s problems read a little like the small ads on the world’s least romantic lonely-hearts website. “A technology is desired that produces a pleasant scent upon stretching of an elastomer film’’ ($50,000). “Surface chemistry for optical biosensor with high binding capacity and specificity is required’’ ($60,000).


Netflix, a film rental website which offers recommendations based on what you looked at, bought, rented or reviewed in previous visits, has skipped middlemen like Innocentive. In March 2006, the chief executive of Netflix, Reed Hastings, met some colleagues to discuss how they might improve the recommendation system, Cinematch. Hastings, inspired by the story of John Harrison, suggested offering a prize of $1m to anyone who could do better.


The Netflix prize, announced in October 2006, struck a chord with the Web 2.0 generation. Within days of the prize announcement, some of the best minds in the relevant fields of computer science were on the case. Within a year, the leading entries had reduced Cinematch’s recommendation errors by more than 8 per cent – close to the million-dollar hurdle of 10 per cent. And it has cost Netflix very little to mobilise all this effort. The company has had to pay out a mere $50,000 progress award, to a team of three AT&T data analysts.


Even Netflix is surprised at how well it’s been going. “We just didn’t think the relevant research community was so big,’’ says Steve Swasey, vice-president.

More than 2,500 teams from 161 countries and comprising 27,000 competitors have entered the contest. Teams from California, Budapest and Toronto have been battling away at the top. Clearly, the million-dollar prize has mobilised far more than a million dollars worth of research effort.


The Netflix prize has been helped by the ease of transmitting data around the world and the affordability of the computing power necessary to have a go. The fun of the challenge alone is one of the biggest attractions to participants. So, too, is access to Netflix’s huge database of recommendations – a dream for statisticians and computer scientists. And the competition has also been fanned by the fact that all improvements are incremental and the company is able to publish listings of the current leaders, meaning the race is verging on a spectator sport.

[THIS IS ABSURD - ONLY PEOPLE WITH TOO MUCH TIME ON THERE HANDS CAN BE BOTHERED WITH 'INTELLECTUAL CHALLENGES' & SECURING NAME RECOGNITION]**


The X Prize and Netflix prize have managed to generate a tremendous amount of interest. That means more than free publicity for the organisers; it also means that the prize catalyses far more effort than one might expect on cold financial grounds. “One of the goals of the prize is to transform the way people think,’’ says Bob Weiss, vice-chairman of the X Prize Foundation. “We were trying to create a sea-change.’’


Weiss says that the founders of the X Prize foundation wanted to revive their childhood dreams of a day when ordinary people would be able to travel into space – expectations formed in the heady 1950s and 1960s. They may get their wish. To Weiss’s delight, Virgin Galactic claims it will soon be in a position to offer private space flights. It will be using the technology that won the X Prize.


Future X Prizes, each one funded by corporate sponsors and philanthropic donors, aim to kick-start other new industries. The Archon X Prize for genomics will be awarded to the team that can sequence 100 human genomes within 10 days, at a cost of $10,000 per genome. That is unimaginably quicker and cheaper than the first private genomic sequencing in 2000, which, according to the X Prize foundation, took nine months and cost $100m for a single human genome. (Craig Venter, the director of that effort, is one of the backers of the new prize.) It is the kind of leap forward that would be necessary to usher in an era of personalised medicine, in which doctors could prescribe drugs and give advice in full knowledge of each patient’s genetic susceptibilities.


Another prize will be awarded to the manufacturer of a popular mass-production car that has a fuel efficiency of 100 miles per gallon. The model is the same each time. The X Prize foundation identifies a goal and finds sponsors; it announces a prize and whips up the maximum possible enthusiasm, with the aim of generating far more investment than the prize itself; the prize achieved, it hands out the award with great fanfare and moves on to set other challenges. The prize winner is left with intellectual property intact, and may capitalise on the commercial value of that intellectual property, if any commercial value exists.

[ISN'T THIS LAST PART OF THE STATEMENT WHAT IT IS ALL ABOUT ANYWAY?? BASIC DISCOVERIES BY THEMSELVES ARE OF LIMITED USE AND VALUE - MOST OF THE VALUE ATTRIBUTABLE TO A DISCOVERY RELATES TO ITS MARKET-RELEVANT USES]**

The X Prize foundation claims that the Ansari X Prize directly stimulated $100m of spending on research and development, 10 times the value of the prize itself. That is clever, and for a handful of sexy challenges it is likely to be a trick that can be repeated.


But the X Prize and the Netflix prize may give too flattering a picture of what might be possible if prizes catch on. Rather, prizes could become humdrum. For the problems listed on Innocentive’s website – “The challenge is to produce a specific citric acid ester in a faster cycle under current specifications’’ ($40,000) – the day of the humdrum has already arrived.


In other cases, for example the advanced market commitment for a pneumococcal virus, the sums of money being invested in the research are so huge already that it is hard to imagine the mere glamour of the $1.5bn “prize’’ weighing heavily on the minds of scientists and inventors.


For both the uninspiring innovation and the billion-dollar research programme, it is the prize money itself that has to do the talking. If that is not the case, the prizes will not multiply research efforts, as the Ansari X Prize and the Netflix prize have done, but will increasingly need to compete with alternative methods of funding innovation – that is, grants and patents – on a level playing field. To become a significant alternative to grants and patents, prizes will have to become very large indeed – large enough to cover, on average, all of the likely research expenditures of all those hoping to win. Is that desirable?


Champions of prizes see them as a component of a wider system to promote innovation, rather than as an outright replacement either for grants or patents. Instead, the hope is that prizes will help to compensate for the specific weaknesses of those alternatives.


The downside of a patent is fundamental to its design: in order to reward an innovator, the patent confers a monopoly. Economists view this as, at best, a necessary evil since monopolies distort prices. In the hope of raising profits from some customers, they will price others out of a market. The most obvious victims are consumers in poor countries.

[PATENTS ARE DISFAVORED ONLY IN 'SOFT' SOCIALIST COUNTRIES WHERE KEYNESIAN 'MIXED ECONOMIES' BOLSTERED BY STATE-CENTRALIZED WELFARE POLICIES ARE FAVORED OVER MERIT-BASED INITIATIVES]**

In an ideal world, prizes could replace patents. Instead of offering a patent for an innovation, the government could offer a prize. The inventor would pocket the prize but would not be allowed to exploit any monopoly power, so the innovation would be freely available to use in products for poor consumers – cheap drugs for Africa, for instance – and, importantly, in further innovations. But to explain that idea is to see its limitations. How could the government know enough about the costs and benefits – and even the very possibility – of an innovation to put a price tag on it and write the terms of reference for a prize competition? For this reason it is hard to see prizes replacing patents in most cases. But it is not impossible.

[AMONG LIBERAL EUROPEAN & AMERICAN POLITICIANS, THE ANTICIPATED POTENTIAL UNASCERTAINABLE ECONOMIC BENEFITS ARE ALWAYS MORE ATTRACTIVE THAN THE UNKNOWABLE FUTURE ECONOMIC COSTS, AS A MATTER OF RHETORIC]**

The modern heir to 18th-century prizes for canning, water turbines and finding longitude at sea is the advanced market commitment for vaccines for the poor: the goal is clear, the costs and benefits can be guessed at, and the quasi-prize nudges the patent system to one side with a prize contract that respects the patent but, in exchange for a large subsidy, radically constricts the holder’s right to exploit it.

[SO MUCH FOR THE EXERCISE OF EXCLUSIVE PRIVATE PROPERTY RIGHTS IN INNOVATIVE WORKS IF THE PRIZE PREFERENCE IS PREFERRED]

Prizes can also, in principle, supplement grants for basic research, paying scientists for results as well as for effort. There is, for example, an “Mprize’’ for creating long-lived mice. The eventual aim is to lengthen human life spans. And the Clay Mathematics Institute, a non-profit body set up 10 years ago by a Boston businessman, is offering million-dollar prizes for the solution of seven “Millennium’’ problems in mathematics.


These prizes are exceptions; but prizes were once the standard way of encouraging basic research. According to Robin Hanson, an economist at George Mason University, more than twice as many 18th-century scientific societies paid for results using prizes or medals than paid for effort with grants. As that changed, scientific societies sometimes ignored the wishes of donors, or even had the wills of deceased donors voided, in order to hand out grants rather than the prizes specified.


The standard historian’s explanation of this trend is that once science became a profession rather than the province of rich amateurs, prizes were no longer a suitable way of funding innovation. Hanson is not convinced. “Most academics who study the issue of prizes have focused on what a prize does to the behaviour of researchers, versus a grant,’’ he says. “But there’s another aspect: what does the person giving the prize or the grant get out of it?’’


He argues that grants are more appealing than prizes to bureaucracies for many reasons, not all admirable: “With grants, there’s all sorts of possible patronage and corruption.’’ Even leaving aside outright graft, there is plenty of opportunity for cosiness and cliques. Then there is the mundane fact that grants are easier to account for in an annual budget than a multi-million prize that could be paid tomorrow, in a year, or never. For Hanson, it was for these reasons, rather than any intrinsic merits, that grants elbowed aside prizes in the 19th century.


Prizes may be making a comeback because of all the money now available from private foundations – which demand results. Not only the X Prizes and the Millennium problems prize, but even the pneumococcal vaccine prize is part-funded by private money. Yet governments are getting in on the act. The US space and defence research agencies Nasa and Darpa both use innovation prizes, and other government agencies look likely to follow with, for example, an “H prize’’ for advances in hydrogen fuel technology.


If Hanson is right, this new trend is a welcome swing of the pendulum towards a modest use of prizes. But not everyone is convinced that prizes will live up to the hype.


“The literature has pushed them as a silver bullet; more recently there’s been a bit more sobriety in the debate,’’ warns Andrew Farlow, an expert in the economics of vaccines at Oxford University. “How much genuine risk-taking can it pull along?’’


The problem is not the principle, he argues, but the details. A vaccine for HIV is a distant and costly prospect, and might require a $10bn or $20bn prize. Inevitably, companies and their shareholders will question whether the prize would be honoured in full. The triggers for releasing some of the prize money are difficult to define: early vaccines would probably be expensive, fallible and risky, but better than nothing. Donors would not want all the money to go to those efforts and leave none to encourage superior successors. Try framing “good enough’’ in legalese, when billions are at stake.


Donors might pay a lot more than they needed to for a substandard product, or the prize might be too restrictive and too small to generate any interest at all. That would drain attention, enthusiasm and political will. “It all sounds like good economics, but whether you could ever set a prize big enough or correct enough to work in those cases is doubtful,’’ Farlow concludes.


But the proponents of advanced market commitments (AMCs) believe the problems can be overcome. “There’s no question that there’s going to be a way to deal with these challenges in a sensible, analytically based way,’’ argues Ruth Levine, vice-president of the Center for Global Development, a think-tank based in Washington, DC, which has been a leading force in evaluating and advocating AMCs. “By that I mean that a proposal or contract will be written that makes sense and is based on good empirical work.’’


The pilot is the pneumococcal vaccine pledge, made in principle back in February 2007, and now being hammered out. It is a big deal – a lot of money is on the table, with the potential to save many millions of lives at a low cost. Yet compared with other possible AMCs, the pneumococcal problem is relatively simple: two credible vaccines are in the late stages of development. Levine acknowledges that this example is as close to a procurement contract as to a pure innovation prize, but believes there is much to be learned from the exercise about whether donors can make a commitment together and handle the legal and accounting challenges. “What this won’t be is a pure test of whether putting a market-like offer out a long distance into the future will give firms an incentive to do early-stage R&D,’’ she says.


That is the dream of AMC proponents, but the true test – a malaria or HIV prize – is some way off yet. Only then will we see whether private companies will take the bait, and the public purse will get value for money. We can be sure that big Pharma will be checking the small print: John Harrison, master clockmaker, was eventually rewarded for his brilliant, accurate maritime clock only by appealing direct to King George III. Neither he nor anyone else was ever judged to have satisfied the conditions necessary to receive the longitude prize.

European Commission Hands 110th Congressional Majority & Presidential Contenders a New Political Issue - Bashing Private Intellectual Property Rights

The following article demonstrates indirectly how the ‘failure to work’ doctrine in international intellectual property (patent) law has been squeezed down from 4 years under the Paris Convention for the Protection of Industrial Property (Patents) to practically zero years, and then used as a justification by governments to declare a compulsory license if there is found to be a ‘lack of adequate competition’.

Pursuant to Article 5 of the Paris Convention, the ‘failure to work’ doctrine essentially affords each member country “the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent”.

However, within the European Union, it appears that a company’s indigenously (internally) developed know-how (as opposed to know-how and technologies acquired by means of merger & acquisition), especially in the healthcare or information technology sectors, is deemed to be a ‘public’ good – or in the international context, a ‘global public good’ (GPG).

Consequently, if the medical or healthcare-related knowledge or technology is unique in the marketplace without peer, and the holders of the patents to such know-how or technologies impose conditions for licensing or refuse to license the patent altogether, the EU Commission’s Antitrust Directorate is empowered to deem (i.e., to invoke a legal presumption of 'monopoly' against) the holders of the patents to such know-how or technology as operating an illegal ‘monopoly’. This makes it easier for governments to recommend the use of antitrust remedies to ‘break’ the monopoly via the issuance of compulsory licenses even though there is NO predatory behavior by the company and NO unreasonable contractual or market behavior by U.S. legal standards.

Emerging country governments, such as the Government of Brazil, are now basing their policies of ‘universal access to healthcare’ and ‘universal access to knowledge’ (A2K) on this approach to patents law. Such approach has also been embraced by many Majority members of the 110th United States Congress.



EU Probes Pharmaceutical Industry
On Dwindling New Patents, Drugs
http://online.wsj.com/article/SB120048256196094295.html?mod=hpp_us_whats_news

The Wall Street Journal Europe

By CHARLES FORELLE
January 16, 2008 9:17 a.m.

BRUSSELS -- European Union investigators raided drug companies in several countries as the bloc's antitrust watchdog launched a wide investigation of potentially anticompetitive practices in the industry.

Neelie Kroes, the EU antitrust chief, said the industry-wide inquiry would examine whether large companies are abusing their market power to prevent competitors from bringing new drugs to market, or whether companies were colluding to restrain competition. [THIS AMOUNTS TO A 'WITCH HUNT' – CORPORATE CITIZENS IN CONTINENTAL EUROPE ARE DEEMED ‘GUILTY’ UNTIL PROVEN ‘INNOCENT’ – PRECISELY THE OPPOSITE SITUATION IN AMERICA DUE TO THE U.S. CONSTITUTION]


AstraZeneca PLC, GlaxoSmithKline PLC, Sanofi-Aventis SA, and Pfizer Inc. said they were among the companies contacted, although the commission did not name the companies searched Tuesday and early Wednesday, nor where they were located.

The EU's so-called sector inquiries are broad-brush examinations; they don't necessarily lead regulators to bring antitrust cases, but can result in substantial fines. Recent sector inquiries have focused on energy markets and payment-card systems. Both eventually resulted in antitrust action -- most recently in the EU's declaring unlawful a type of interbank fee set by MasterCard.

Mrs. Kroes cited figures indicating that the number of new drugs launched annually has declined from an average of 40 in the late 1990s to 28 between 2000 and 2004. "The pharmaceutical markets are not working as well as they might," she said. [THIS IS ANOTHER ‘MARKET FAILURE’ WHICH THE EU REGULATORS WISH TO ‘CORRECT’ THROUGH GOVERNMENT INTERVENTION/REGULATION ANATHEMA TO EXCLUSIVE PRIVATE PROPERTY RIGHTS]

The pharmaceutical sector inquiry seems likely to reanimate a debate about the intersection of competition policy and patent law. EU officials say one concern is that companies are "misusing" patent laws to block new drugs made by rivals. Such misuse might entail overbroad patent filings or specious lawsuits. The officials say that if the companies in question are "dominant," then any abusive behavior falls under their jurisdiction as a violation of EU monopoly rules.[THERE DOES NOT NEED TO BE REALLY AN ‘ILLICIT’ ACTIVITY – JUST THE MERE PRESENCE OF INNOVATION LEADERSHIP AND NO DESIRE TO LICENSE THE TECHNOLOGY...]

Another potential violation is more straightforward -- collusion between companies, for instance, agreeing not to enter each other's markets, or taking payment not to launch a competing drug. [THIS IS A LEGITIMATE ‘CONCERN’ IN THOSE INSTANCES WHERE IT CAN BE DEMONSTRATED BY CLEAR & CONVINCING EVIDENCE]

The EU has taken on alleged patent abuses before. In 2005, the Commission fined AstraZeneca €60 million ($89 million) for trying to block generic-drug makers from coming out with versions of its blockbuster ulcer drug Losec. The Commission said AstraZeneca gave "misleading" information to national patent offices that led them to wrongly extend the company's patents on Losec. AstraZeneca has appealed the case.

Under EU regulations, commission officials can raid the premises of businesses operating in Europe, whether or not they are European companies.

The EU began the sector inquiry with unannounced inspections -- triggering the first ones within hours of the commission's decision Wednesday to authorize the inquiry. In earlier sector inquiries, EU officials had begun more politely, with requests for information.

--Dow Jones Newswires contributed to this article.

Former ITSSD Intern Reveals How American & European Activists and Politicians Attack U.S. Intellectual Property Rights

The New War on Drugs:
Activists and Politicians Attack Intellectual Property Rights

Capital Research Center - Organizational Trends

January 2008

http://www.capitalresearch.org/pubs/pdf/v1199294989.pdf

America’s pharmaceutical industry is the envy of the world and the savior of millions of sick people. But activist groups, many of them founded by Ralph Nader and funded by liberal foundations, are campaigning to limit the industry’s incentives to produce new life-saving drugs. Their strategy focuses on undermining the intellectual property rights that protect pharmaceutical innovation.

By Karl Crow


Karl Crow is a 3rd Year student at Temple University's Beasley School of Law. In 2007 he was an intern at the Institute for Trade, Standards, and Sustainable Development (ITSSD) in
Princeton, New Jersey.

Open Source for Cost Effective Drug Discovery

Dr. Samir K
Brahmachari,

the new Director-General of the CSIR is all set to unleash the open source revolution in drug discovery and biotechnology. The Economic Times Reports: “For the first time ever, India plans to launch an innovate drug discovery programme roping in global IT firms, researchers, companies, and young minds at scientific laboratories to invent drugs at a fraction of the cost of an MNC-developed drug. Drug discovery has hitherto been the forte of MNC pharma giants.The government has begun discussions with Sun Microsystems to set up web-management tools for an ‘open source’ drug discovery project, which works similar to a popular online encyclopaedia formed by articles contributed and edited by the brightest minds worldwide.

The first project would be to develop medicines for tuberculosis and later extend to other diseases like malaria and AIDS.Under the proposed project, researchers attached to institutions like the Royal Society of UK, Imperial College of London, Medicine Sans Frontiers and various Indian universities will have an opportunity to work on a drug discovery process even at an individual level. What’s more, the contribution would also fetch reward and recognition. Corporates like the Kinetic Group, entities like the Welcome Trust and various corporate groups would sponsor these rewards.

The project is likely to be implemented either by the Council of Scientific and Industrial Research (CSIR) itself or the Institute of Genomics and Integrative Biology.‘We have already built a database of the requirements for developing drugs for infectious diseases. This would be hosted online, where individual experts could contribute in solving specific aspects of the drug discovery. Specific contracts will then be assigned to individual contract manufacturers and clinical research organisations,’ the project’s architect and CSIR’s new director general Samir K Brahmachari told ET.

‘The chemical entities thus developed will instantly become generics as the knowledge will be in public domain. This is diametrically opposite to the concept of intellectual property protection, which involves legal expenses to bar others from applying their minds on the invention,’ Mr Brahmachari said. Mr Brahmachari also heads the department of industrial research. ‘When a thousand young students contribute in solving a complex puzzle, we are empowering them to be the knowledge leaders of tomorrow.

For researchers at state-owned laboratories, it offers an exiting challenge of social importance,’ he added. It is likely that generics makers, like Ranbaxy and Cipla, could be more interested, than MNCs, as it would be volume-based. MNCs are more keen on low-volume high-value brands.If successful, the project would also challenge MNC drug makers claims that they invest billions of dollars in risky experiments hoping to develop one useful drug.

The project will get one-third funding from the government, one-third from international sources and the rest from philanthropic entities.” Sounds like a fantastic idea! Dr. Brahmachari’s open source strategy appears not only to challenge the notion that patents are necessary for innovation, but also the notion that investment for mass production needs monopoly incentives through patents. Look out for Spicy IP’s interview with Dr. Brahmachari in the coming week!

Most Indian drug majors too in line for patent protection

14 Dec, 2007, 0046 hrs IST,Khomba Singh, TNN




NEW DELHI:

It’s not just global drug discovery majors that are seeking patent protection. Out of the 8,000 drug patent applications in India filed between 1995 and 2004, about 40% are from Indian pharma companies.

Domestic majors such as Ranbaxy Laboratories, Dr Reddy’s Laboratories and Cipla have filed over 100 patent applications each. Between 1995 and 2004, the Indian patent office received over 8,000 patent applications related to medicine.

Ranbaxy Laboratories, India’s largest drug maker, has claimed protection for 112 drugs during the period, including few which are at various stages of clinical development. In addition, Ranbaxy has also filed 30 patents in 2006, including seven for new drug delivery systems (NDDS), which are in advanced stages of development.

Similarly, other pharma majors such as Cipla and Dr Reddy’s Laboratories have each sought protection for over 100 drugs, says Dr Amit Sengupta who reviewed the mailbox applications in India in collaboration with the health ministry. However, many of these applications, both from global MNCs and Indian companies, are frivolous which may not qualify as a candidate for a patent.

According to Professor Carlos M Correa, a former member of the World Health Organisation (WHO) Commission on Intellectual Property, Innovation and Public Health (CIPIH), many of the patent applications worldwide are merely ‘new laboratory techniques’ and therefore would not qualify for patents. “The pipeline of discovery drugs are drying up. While there are around a million applications in the US, only 20 new chemical entity (NCE) got US Food and Drug Administration’s approval in 2005 compared to 51 in 1997,“ he said.

[THIS IS NOT BRAIN SCIENCE - WHEN FACED WITH IDEOLOGUES LIKE DR. CORREA WHO DISPISE PRIVATE PROPERTY RIGHTS, ESPECIALLY IPRs, PROMOTE CONVERSION OF PRIVATE PROPERTY INTO PUBLIC COMMUNAL PROPERTY AND SEEK TO JUSTIFY DEVELOPING COUNTRY GOVERNMENT EXPROPRIATION OF PATENTS WITHOUT PAYMENT OF FAIR & ADEQUATE COMPENSATION, PROFIT-SEEKING LIFE SCIENCES COMPANIES IN THE PHARMACEUTICAL & BIOTECHNOLOGY SECTORS WILL SLOW DOWN THEIR DEVELOPMENT OF PATENTABLE MEDICINES.]**

Companies are now merely tinkering with the existing drug and seeking patent applications for the same. Only 2-3 application from each of the Indian companies are serious contenders for a patent, Dr Sengupta added. However, some innovator companies feel that there are many innovations which deserve patent protection. “Innovations are either patentable or non-patentable. Patent offices are getting mature to weed out those inventions which do not merit a patent and one should look at the actual data of patents rejected before a claim like this is made, “ Novartis India vice-chairman and MD Ranjit Shahani said.

Since India became trade-related aspects of intellectual property rights (TRIPS)-compliant in 2005, both global and Indian companies have rushed to claimed protection for new drugs or innovations. If drugs get patented, the innovator company will get exclusive marketing right for 20 years. Few global companies have already got patent for drugs in cancer, anti-Aids and other therapeutic areas.

Foolish Academics Prescribe Wrong Antidote for Developing Country Diseases: Fewer Patents & More Compulsory Licenses Will Cause More Harm Than Good

Fewer Patents, More Compulsory Licenses: The Knock-Off Effects of India's Strict Patent Act and Thailand's Compulsory Licenses

By Professor Brook K. Baker

Health GAP

December 11, 2007

Activists have long claimed that access to medicines campaigns set precedents that have a snowball effect. What we are now seeing, given India's victory against Novartis in the drug company's challenge to section 3d of the India Patent Act and given Thailand's highly publicized campaign to issue compulsory licenses on both AIDS and heart disease medicines, is a new wave of patent withdrawals and a growing wave of compulsory licenses.

[CORRECTION, PROF. BAKER: WHAT WE ARE NOW SEEING IS A LYNCH-MOB APPROACH TO PUBLIC ADVOCACY BASED ON FEARS AND MISREPRESENTATIONS RATHER THAN FACTS. ACTIVISTS WILL CAUSE MUCH GREATER HARM THAN GOOD TO DEVELOPING COUNTRY EFFORTS TO IMPROVE PUBLIC HEALTHCARE]***

This reciprocal wave action creates a wider opening for continuing access to newer and lower costs medicines. But the promise of this opening will only be realized if more countries amend their patent acts to take advantage of the TRIPS-compliant, definitional flexibilities that India has enacted and if more countries use the TRIPS-compliant flexibilities for issuing compulsory licenses for generic medicines that Thailand has used.

[ACTUALLY, MORE AND MORE PHARMACEUTICAL AND BIOTECH COMPANIES WILL WITHDRAW PATENT APPLICATIONS IN SUCH DEVELOPING/EMERGING COUNTRIES BECAUSE OF THEIR CONCERN THAT THEIR MEDICAL INNOVATIONS WILL BE EXPROPRIATED BY GOVERNMENTS WITHOUT PAYMENT OF FAIR & ADEQUATE COMPENSATION - HENCE, THEY WILL NO LONGER MAKE AVAILABLE THE MUCH NEEDED MEDICINES DEVELOPED AND COMMERCIALIZED OUTSIDE SUCH COUNTRIES BASED ON RECOGNIZED AND LEGALLY PROTECTED PATENTS. IDEOLOGUES LIKE PROF. BAKER, NEVERTHELESS CONTINUE TO INSIST THAT PRIVATE IP SHOULD BE CONVERTED INTO PUBLIC PROPERTY.] ****

Patent victories

In the summer of 2006, following massive August 7 protests in Bangalore and Bangkok, GlaxoSmithKline withdrew its patent application for lamivudine/zidovudine (Combivir or Combid), an important first-line combination antiretroviral, both in India and, perhaps even more significantly, in Thailand. The withdrawal in India was clearly obligatory under India's new Patent Act 2005, which has strict standards preventing patenting of mere combinations of existing medicines, and was relatively straightforward, even under Thailand's easier, more "Westernized" patenting standards. Combivir was a simple fixed-dose combination of two earlier discovered drugs and involved neither newness nor an inventive step. The principal new "ingredient" in the combination was silicone - a trivial addition graphically represented by Indian demonstrators when they dumped sand in front of the Glaxo office. The anti-Combid victory in Thailand was reminiscent of an earlier activist victory in 2004 where a robust civil society movement forced Bristol Myers Squibb to abandon its patent on ddi. Although Glaxo saw the writing on the wall, Novartis did not and tried to mount a TRIPS and constitutional challenge to section 3d of the Indian Act.

Once again protestors mounted an international campaign, and good lawyering by the Lawyers Collective and others resulted in a resounding defeat for Novartis in the Chennai High Court, in August, when all of Novartis's efforts to undermine India's strict standards for patentability were defeated.

At the time, activists claimed that the Novartis case had critical implications for access to medicines, certainly for AIDS drugs, but for other medicines as well. There were thousands of patent applications waiting in the India 1995-2005 patent "mailbox," the vast majority of which involved minor tweaks on pre-1995 medicines. If Novartis had won, many of those patent applications would have been pursued and many might have succeeded. However, with Novartis's defeat, the pharmaceutical industry began to strategically review its mailbox filings, and its new filings as well, to weed out the clearly unmeritorious applications.

The most recent example is further withdrawals by GlaxoSmithKline of two ARV patent applications, on Abacavir and Trizivir (GSK drops claims on two AIDS medicines, The Economic Times, 7 Dec 2007). Sources report that Glaxo's decision to withdraw those applications was in response to Novartis's loss and was undertaken to avoid a patent-defeat precedent that might have undermined its attempts to pursue patent claims in countries with weaker patent standards.

The growing evidence of India's success in stopping the flow of patent applications on trivial variations of existing products should lend courage to activists and patent reformers in other countries. India has clearly set a new and defensible standard for patenting only truly innovative pharmaceutical products. The Philippines parliament is already considering a statutory amendment in line with section 3d of the Indian Act, but the momentum should not stop there. Other countries can lighten the load on their under-resourced patent offices and ensure high standards of patentability for medicines by taking the route forged by India.

The Indian success has also been reinforced by the availability of pre-grant opposition procedures, which allow consumer groups, generic companies, and IP specialists to intervene and challenge weak patent applications. There are already fifteen pre-grant oppositions in India concerning AIDS medicines and the number is likely to grow as public interest groups begin to appreciate the importance of stopping 90-95% of the patent applications on pharmaceutical patents that can be rejected under the Indian standard even though they sail through the U.S. patent office.

[UTOPIAN ACADEMICS SUCH AS PROF. BAKER CONVENIENTLY OMITS THE INTENTION OF ACTIVISTS, NAMELY, TO ESTABLISH MEDICINES AND MEDICAL TECHNOLOGIES AS 'PUBLIC GOODS' THAT MAY BE EXPROPRIATED BY GOVERNMENTS]***

Compulsory licensing victories

Activists in Thailand have waged a near decade-long campaign to convince the Thai government to issue compulsory licenses on AIDS medicines.

Although the first effort in 1999 concerning ddi was unsuccessful because of fears of U.S. trade retaliation, activists persisted and new leadership in the Thai Health Department issued compulsory licenses on efavirenz, lopinavir/ritonavir, and clopidrogel in late 2006 and early 2007. Of course, Thailand was not the first developing country to issue compulsory licenses on AIDS medicines. Malaysia and Indonesia had done so earlier for first-line regimens, and over half a dozen countries had done so in Africa as well. However, in terms of middle-income countries with large populations living with HIV/AIDS, Thailand was the first to issue licenses on higher-cost, second-line medicines. Brazil had threatened such licenses, but in the end had improvidently settled for price concessions instead.

The impact of Thailand's leadership is immediately apparent. Shortly after Thailand's bold move, Brazil issued a compulsory license on efavirenz on May 4. Indonesia did so even earlier, in March of 2007, though, unlike Brazil, its license drew little attention from Big Pharma, the USTR, or the army of right-wing think tanks that have mounted a global disinformation campaign about the legality and propriety of compulsory licenses.

Emboldened by Thailand, Indonesia is considering additional licenses on tenofovir, videx, and lopinavir/ritonavir. The proactive Ministry of Health in Thailand is also continuing to weigh additional government use C.L.s on four cancer medicines and up to 20 additional products for treating hypertension, diabetes, and hyperlipideamia. Lawyers in South Africa have petitioned the Competition Commission to obtain additional licenses on efavirenz, both to promote competition but also to allow co-formulation of fixed-dose combinations.

Most of the licenses thus far have been issued for government use. This form of licensing has certain advantages because it is widely practiced in rich countries, including the U.S., because it obviates the need for prior negotiations with the drug company, and because it reserves the private sector to the patent holder's monopoly control, undermining claims that all profits are foregone and that research and development will be undermined.

However, there are also some drawbacks to government use licenses, especially when one considers how much pressure has been brought to bear on Thailand even though it carved out a private-sector monopoly reserve for Big Pharma. The first drawback, not so apparent in Thailand as perhaps in other countries, is that many poor people cannot access medicines in public sector pharmacies, which often experience stock-outs or otherwise fail to carry essential medicines. These patients must therefore rely on private sector pharmacies where monopoly pricing prevails. Thus, in countries where high disease burdens persist and where major portions of the population are de facto dependent on private-sector pharmacies, government use licenses may be an imperfect solution to access on the ground. The second drawback is that having two pricing regimes in the same country, high private-sector prices and low public-sector prices, encourages "arbitrage," or more accurately theft and resale of public sector medicines to private sector consumers. Third, avoiding negotiations may be overrated since governments can set short time limits for such negotiations and insist on strict pro-access terms whether by regulation or negotiation demands.

The impact of Thailand's compulsory licensing victories will be lessened if other developing countries do not follow suit. In fact, a better scenario will arise when developing countries cooperate more vigorously in the selection and timing of compulsory licenses. Generic producers are most likely to invest the $1-$1.5 million dollars needed to formulate a generic equivalent if they can see a sizeable market in developing countries that aggregate their collective demand. In addition, with larger, more secure, and more predictable markets, more producers will enter the market and more producers will manufacture at efficient economies of scale. The combination of competition and efficiency will result in lower prices and more secure and redundant sources of supply.

The strongest way for countries to cooperate may well be through creation of patent pools that allow the collective management of both compulsory and voluntary licenses (negotiations on both in- and out-licenses).

Alternatively, developing countries could form regional "buying groups" and/or work intensively with the Clinton Foundation (at least for ARVs).

However, in order to be able to take advantage of their South-South strength, countries will need to be more proactive both in amending their patent legislation to allow maximum use of TRIPS-compliant flexibilities and in utilizing those flexibilities to actually issue compulsory licenses.

The current, countervailing strategy of Big Pharma, besides USTR intimidation and even product withdrawals, seems to be the use of strategic price discounts and restrictive licensing. Although these concessions look tempting in the short-run - since they reduce the treat of trade sanction and product embargoes - they are futile in the long run since they are Pharma controlled and because they deter generic entry. An even greater danger is presented by so-called free trade agreements where the United States attempts to impose TRIPS-plus intellectual property protections that hamper countries ability to ensure access to medicines for all.

Conclusion

The space that has been created by activist-backed defense of India's strict patent standards and by activist-prompted issuance of multiple compulsory licenses in Thailand is one of the most promising outcomes of AIDS advocacy in 2007. Hard fought precedents have been won, but enemies in Big Pharma and in the U.S. government are hard at work plotting a reversal of fortune. It is only by building on these recent victories - by rejecting more patents, by issuing more compulsory licenses, and by opposing TRIPS-plus IPR provisions - that activists and pro-access forces in developing countries can create a momentum that cannot be stopped.

Standing still is not an option.

Professor Brook K. Baker, Health GAP
Northeastern U. School of Law
Program on Human Rights and the Global Economy