When patents kill: Genzyme's patent-protected, life-saving drug
Should intellectual property protect the rights of a pharmaceutical company who can't produce enough of a key medication?
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“It is by no means self-evident that patents encourage an increased absolute quantity of research expenditures. But certainly patents distort the type of research expenditure being conducted. For while it is true that the first discoverer benefits from the privilege, it is also true that his competitors are excluded from production in the area of the patent for many years. And since one patent can build upon a related one in the same field, competitors can often be indefinitely discouraged from further research expenditures in the general area covered by the patent. Moreover, the patentee is himself discouraged from engaging in further research in this field, for the privilege permits him to rest on his laurels for the entire period of the patent, with the assurance that no competitor can trespass on his domain. The competitive spur for further research is eliminated. Research expenditures are therefore overstimulated in the early stages before anyone has a patent, and they are unduly restricted in the period after the patent is received. In addition, some inventions are considered patentable, while others are not. The patent system then has the further effect of artificially stimulating research expenditures in the patentable areas, while artificially restricting research in the nonpatentable areas.”Skip to next paragraph
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See also Arnold Plant, “The Economic Theory Concerning Patents for Inventions,” Economica, New Series, 1, no. 1 (Feb., 1934), p. 43.)
And yet, in Orwellian fashion, the intellectual properteers justify IP in the name of promoting innovation. War is peace. Sickness is health. Murder is collateral damage. And stultifying innovation is somehow promoting it!
The victims of this murderous policy in this case tried to lobby the NIH to authorize other companies to produce some more of the life-saving drug–and pay royalties to Genzyme. How is Genzyme harmed by this? They would be receiving the proceeds of a private tax levied in their favor courtesy of the USPTO. But, predictably, disgustingly, the NIH rejected the petition. There is no justification for this outrage. What the petitioners basically want is a compulsory license. The feds have the authority to grant this. There is no good reason not to. As I argue in Reducing the Cost of IP Law:
Paying royalties is one thing. This is similar to a tax. It impedes and puts a drag on efficiency. Worse still is the prospect of an injunction, which can simply shut a company down. Quite often this is what a competitor will seek. They do not want damages or money: they want to dominate the market and eliminate competition. Or the threat of injunction is used to basically wring money from an alleged infringer (e.g., the $600 million RIM (BlackBerry) had to pay, even though the patents were under appeal at the PTO, due to the threat of an injunction).
If the purpose of the patent system is to provide some incentive to innovators, then receiving a monetary payment should be sufficient. Patent injunctions should be abolished entirely. The only remedy should be an award of damages (for past infringement) or a compulsory license (ongoing royalties based on future “infringement”).
This would prevent patentees from shutting down competitors. At most, they could impose a small “tax.” Litigation costs, insurance premiums, and the ability of patentees to extract unreasonable royalties from alleged infringers would be radically curtailed. On the other hand, because patentees would still be able to seek reasonable royalties, there would still remain a substantial incentive to file for patents.
The compulsory licensing approach is not new. Some countries impose compulsory licensing on patentees who do not adequately “work” the patent. The United States already provides for compulsory licensing in certain cases, as the US government threatened to do in the Cipro anthrax drug case. Also, in the wake of the recent eBay case, some courts are awarding some form of ongoing royalty of compulsory license instead of an injunction.