IDEAS AND OWNERSHIP: The concept of protecting ideas and innovation by legal means dates back to antiquity. But many of our existing laws are under strain, their suitability and ultimate purpose called into question.
Here, Thomas Faunce explains that when energy and pharmaceutical companies attempt to acquire or hold on to patents for the sake of extra profits by reducing competition, innovation suffers.
There has long been controversy over the balance between protecting patents to facilitate innovation and addressing the great social and environmental needs of our times.
Inventors need patents to protect their ideas. But often those patents are bought out by companies with no direct role in the invention and no plan to improve it. At some point, such excessive patent rights begin to impede the process whereby innovations are refined and improved. Patents then become mechanisms for freezing out competition simply for the sake of prolonging profits.
Patents haven’t prompted the develop of new antibiotics, for example, or new medicines for many diseases in the developing world. Likewise, patents in the “old photosynthesis” (coal, gas and oil) energy field may be acquired chiefly to inhibit the globalisation of new molecular solar fuel technologies that positively address our energy security and climate change problems.
Patents are sometimes inaccurately treated as a corporation’s “natural” intellectual property right (IPR). Instead, they are more accurately depicted as an intellectual monopoly privilege (IMP). A consequence of policy focus on the former view is that companies may be encouraged to replace genuine product innovation with innovation in lobbying, collusion and regulatory shenanigans to freeze out competition from the market place.
Such strategies can include the use of trade agreements and memorandums of understanding with governments, and freedom of information legislation.
In the context of pharmaceutical patents, these tactics are often called “evergreening”.
In the context of renewable energy, they can involve the use of companies pejoratively referred to as “patent trolls”. These take up patents in expanding and potentially lucrative fields simply to enhance profits.
Renewable energy patent tactics
One of the most exciting areas of renewable energy research is the development of molecular solar fuels. Such technology uses sunlight to power the splitting of water as a source of hydrogen fuel which, when burnt, produces fresh water.
Debates in this area have focussed on whether patents should cover solar fuels processes and functions such as nanotechnology components for light capture, electron transport and water catalysis.
If patent ownership in the solar fuels area becomes fragmented, researchers may find their “follow-on” research hampered by the high cost and difficulty of negotiating contracts with large numbers of IMP owners.
Without some prior licensing and sharing arrangement, each individual solar fuels patent owner will have an incentive to overcharge other researchers requiring access. The research and development of critical innovations for energy security and environmental sustainability could thereby be inhibited.
Pharmaceutical patent evergreening tactics
The case of the Department of Health and Ageing v iNova Pharmaceuticals (2010) illustrates how pharmaceutical companies employ evergreening tactics to hold on to their patents.
The Federal Court overturned a decision of the Administrative Appeals Tribunal (AAT) that would have compelled the Australian Therapeutic Goods Administration (TGA) to reveal, under a Freedom of Information request, to a corporate pharmaceutical patent holder (iNova Pharmaceuticals) whether the TGA had received an application to register a generic version of the patented drug.
The AAT’s determination would have compromised the listing of a generic drug on the Pharmaceutical Benefits Scheme. And it would have breached the 2006 amendments to the Patents Act 1990 (Cth) which protect the right of generic manufacturers to get products ready so they can immediately “springboard” or rapidly launch into the market when the patent, on which their drug is based, expires.
Another evergreening tactic is to undercut and then take over the generic market. The patented pharmaceutical industry (comprised of companies that hold patents) has lobbied successive Australian governments to drop the price it pays for generic drugs. Prices have fallen between 12% and 25% and have undercut the profit margins of once-Australian generic companies so much that they have shed their research arms and jobs. In the end, most of these generic companies have either closed or been purchased by supranational patent-holding drug companies.
In another recent evergreening or patent-perpetualising tactic, US pharmaceutical companies are seeking to use negotiations for the Trans Pacific Partnership Agreement (TPPA) to create an appeals mechanism for the decisions of the expert committee that lists drugs on the PBS. This would would allow patented drug companies to challenge decisions to compare their price to that of a cheaper generic drug that has the same level of safety and efficacy.
Other US-sought clauses seek to sway the PBS listing system towards processes that require the PBS to accept whatever price a patented drug company offers, without the capacity to check whether those prices are fair and based on market competition.
Raising the bar
To overcome the use of patents to inhibit community and environmental benefit in areas such as solar fuels and pharmaceuticals, law reform should focus on what patent experts call “raising the bar of patentability”.
Patents should not be granted simply to allow companies to profit from, and potentially impede, an area of expanding research that is important to the national interest.
When a patent expires, competition should be rapidly allowed to enter the market. If a public health crisis evolves, patents should be able to be discarded and, after reasonable compensation is paid, mass production commenced.
Processes for civil society objections to patents should be strengthened through legislation. There should also be stronger anti-trust and anti-fraud provisions against the misuse of patents. Such provisions could be based on the US false claims laws that financially compensate private sector informants about fraud.
In relation to solar fuels, measures could include more stringent interpretations on what qualifies as a patent, adopting robust experimental-use exceptions, enhancing licensing powers for both government funded and privately owned patented technologies and expanding the grounds for public “march‐in” rights over government-funded inventions.
Many of these suggestions have been picked up in Australia’s Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 (Cth).
The Bill proposes changes to the Patents Act 1990 (Cth) that will remove current restrictions on the type of information patent examiners consider when determining whether an application discloses an “inventive step”.
The Bill also creates a more stringent test for the usefulness of a patent and increases the standard and amount of information applicants are required to disclose to satisfy a provisional application. It also imposes a stricter “on the balance of probabilities” standard for the granting of patents.
This important bill was introduced to the Senate last year and is expected to pass early this year.
This is the fourth part of Ideas and Ownership. To read the other instalments, click on the links below:
Part One: IP, patents, copyright, you
Part Two: Do patents promote innovation?
Part Three: The art of war: know your enemy’s patents, and your own