ABA Intellectual Property Law Section’s Resolution 413-1
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date:
07/11/2006 -
news source:
News Stories
July 11, 2006 — On June 22, 2006 the Intellectual Property (IP) Law Section of the American Bar Association (ABA) held its summer meeting in Boston. On the agenda were the presentation, debate, and vote upon various resolutions drafted by select subcommittees. One resolution in particular, 413-1, entitled State Prescription Drug Compulsory Licensing, drafted jointly by subcommittees 413 (Patent Licensing) and 108 (Prescription Drug Compulsory Licensing), was presented, debated, and overwhelmingly passed. Presented by BayBio member Allison Young, an attorney in Morgan Lewis & Bockius’ Palo Alto office and coauthor of the resolution, along with a fellow contributing author, the resolution establishes the ABA IP Law section’s official opposition to any state or local law that provides for compulsory licensing of any patented product or process. With its ratification, this opposition became the official position of the ABA’s IP arm regarding state compulsory licensing proposals.
The resolution responds to various bills that have been introduced recently in state legislatures contemplating compulsory license schemes for pharmaceuticals that attempt to undercut current drug prices. State compulsory patent licensing allows a state government to grant licenses to make, use, or sell a patented invention by the state or its designees, without the permission of the patentee. Prompted by the perceived unreasonable cost of patented pharmaceuticals, and by the inability of some patent holders to manufacture sufficient amounts of potentially life-saving drug treatments, state governments have exhibited signs of resorting to the issuance of compulsory licenses for pharmaceutical compositions protected by a U.S. patent. The compulsory licenses effectively would permit the states to force a patentee, in most cases a pharmaceutical company that patents a useful and innovative new pharmaceutical composition, into a license agreement. Using the compulsory license, the state government would permit third parties to manufacture and sell the pharmaceutical composition in competition with the patentee in an attempt to greatly reduce prices to, for example, Medicaid patients and state employees, or alternatively all citizens within its territorial boundaries.
In recent years, states such as West Virginia and the District of Columbia have considered (though not yet successfully passed) legislation that would allow them to grant a license to a state designated manufacturer to produce and sell a generic version of a patented drug product if the price of the drug in their state or the district is deemed unreasonable, inflated, or above other designated limits. Various proposals include limiting generics developed under a compulsory license only to state employees, while some propose availability to all citizens; some limit targeted drugs to only “life-saving” medications, while others target any and all medicines; and some determine an “inflated” price by comparison to the cost of the drug in other countries. On May 25, 2006, Senator Patrick Leahy (D-VT) introduced Senate bill S.3175 before Congress that would allow U.S. companies to make generic versions of patented medicines for export to impoverished nations that face public health crises but cannot produce certain life-saving medicines for themselves. (Life-Saving Medicines Export Act of 2006). Those patent holders would receive compensation in the form of a royalty payment under a so-called “compulsory license,” and the generic companies would then be required to sell those less-expensive generic drugs only to least-developed or developing nations.
Resolution 413 addresses arguments both in favor of and against state compulsory licensing, but overwhelmingly takes the position that these proposals are unconstitutional, have detrimental economic and social consequences, and, therefore, should be adamantly opposed. In the resolution and during the debate, proponents of compulsory licensing argued that the law already allows states to grant compulsory licenses so long as the Due Process Clause is satisfied and just compensation is paid. In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999), the United States Supreme Court indicated that a state’s infringement of a patent violates the Constitution only where the state provides no remedy, or only inadequate remedies, to injured patent owners for its infringement of their patent under a deprivation of property without due process theory. Proponents also argued that compulsory licensing would meet the U.S. obligations to comply with its agreements to certain world treaties, and that questions of global health, humanitarianism, and even national security demand compulsory licensing, citing the emergence in recent years of serious diseases and outbreaks, as well as threatened pandemics such as SARS, avian influenza, and HIV/AIDS, in addition to the potential for future outbreaks if serious diseases are not treated, cured, and contained. Opponents of state compulsory licensure, however, won the debate, arguing that any state compulsory licensing legislation would be unconstitutional in view of federal preemption founded in the Supremacy Clause, Due Process, the Commerce Clause, and the inability to meet the requirement of “just compensation” under the Takings Clause. Opponents also argued the policy and wider implications of compulsory licensing such as implications and issues related to regulatory approval and Hatch-Waxman ANDA requirements; consequences to preexisting licensing agreements; economic implications, such as astronomical costs associated with such programs; threats to industries; commerce and the economy; inequities with respect to which drugs would be subject to compulsory licensure and why, as well as who would get the benefit of availability of generic alternatives; negative impacts on the pharmaceutical industry; innovation and advanced development; and the inconsistency with U.S. positions taken with respect to agreements under TRIPS (Trade-Related Aspects of Intellectual Property Rights). The resolution discusses all of these issues in detail and concludes that state compulsory licensure efforts are misplaced, unconstitutional, and potentially more damaging than any perceived problem they are suggested to address, and any proposals of such would be opposed by the ABA and its members. For a more thorough discussion, and to read the resolution in its entirety, click on State Prescription Drug Compulsory Licensing.
Related Attorneys:
Allison K. Young