KEI Special 301 supplemental comments: Compulsory Licensing not restricted to “Emergencies” or “Measure of Last Resort”

At the February 24, 2015 USTR hearing on Special 301, KEI asked to provide supplemental comments on R&D for the record, and KEI was separately asked by USTR to provide comments on online pharmacies, and by DHHS to comment on the relationship between emergencies and compulsory licensing. (The KEI page on Special 301 is here: /ustr/special301).

Below are the comments on compulsory licensing and emergencies:

KEI Response to Question Regarding PhRMA Submission on Ecuador, Including in Particular, the PhRMA Reference to Narrowing the Use of Compulsory Licensing to “True Health Emergencies and As a Measure of Last Resort.”

In the matter of the Office of United States Trade Representative (USTR) Notice: 2015 Special 301 Review: Identification of Countries Under Section 182 of the Trade Act of 1974
Docket ID: USTR-2014-0025

February 27, 2015

At the February 24, 2015 hearing, the representative from the Department of Health and Human Services asked KEI to comment on the relationship between compulsory licenses and emergency situations, and referred to page 109 of PhRMA’s submitted comments, where in the context of compulsory licensing of patents on drugs, the trade group said:

“A close monitoring of this subject should be maintained to ensure that a compulsory license for a patent covering a medicine is granted only when there is a true health emergency and as a measure of last resort.”

The PhRMA submission was asking USTR to undertake “close monitoring of this subject” in Ecuador in order to “ensure” that compulsory licenses for medicines are “granted only when there is a true health emergency and as a measure of last resort.”

PhRMA did not assert that compulsory licenses are limited to an “emergency” situation by the WTO TRIPS Agreement or by other trade agreements or patent treaties, but they did ask USTR to use bilateral pressure to enforce this norm. PhRMA was also certainly exploiting a known area of confusion about compulsory licensing of drug patents, one that PhRMA and several of its member companies have carefully nurtured themselves over the years.

In a September 2006 press briefing titled, “Frequently Asked Questions: Compulsory licensing of pharmaceuticals and TRIPS,” the WTO Secretariat provides a comment on this issue:[1]

Does there have to be an emergency?

Not necessarily. This is a common misunderstanding. The TRIPS Agreement does not specifically list the reasons that might be used to justify compulsory licensing. However, the Doha Declaration on TRIPS and Public Health confirms that countries are free to determine the grounds for granting compulsory licences.

The TRIPS Agreement does list a number of conditions for issuing compulsory licences, in Article 31. In particular:

normally the person or company applying for a licence has to have tried to negotiate a voluntary licence with the patent holder on reasonable commercial terms. Only if that fails can a compulsory licence be issued, and

even when a compulsory licence has been issued, the patent owner has to receive payment; the TRIPS Agreement says “the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization”, but it does not define “adequate remuneration” or “economic value”.

There’s more. Compulsory licensing must meet certain additional requirements: it cannot be given exclusively to licensees (e.g. the patent-holder can continue to produce), and it should be subject to legal review in the country.

You said “normally” …

Yes, this is where the confusion about emergencies arises. For “national emergencies”, “other circumstances of extreme urgency” or “public non-commercial use” (or “government use”) or anti-competitive practices, there is no need to try first for a voluntary licence. It’s the only instance when the TRIPS Agreement specifically links emergencies to compulsory licensing: the purpose is to say that the first step of negotiating a voluntary licence can be bypassed in order to save time. But the patent owner still has to be paid.

Under the WTO rules, the grounds for granting a compulsory license are broad, and indeed almost open-ended. According to Paragraph 5(b) of the Doha Declaration on TRIPS and Public Health, which is binding on all WTO members:

“Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.”

In practice, WTO members have used diverse grounds to permit non-voluntary use of patents, including to remedy anticompetitive practices (including but not limited to excessive pricing, refusals to license, failures to disclose patents to standards making bodies, etc.), for government use, and to protect the public interest or to promote access to health care.

Even though the United States does not have a general compulsory license statute (unlike nearly all other WTO members), it has numerous provisions that are used to grant non-voluntary uses of patents, for very diverse uses. Thus, for example, when Exxon successfully petitioned the U.S. Federal Trade Commission’s (FTC) to obtain a compulsory license on the Unocal patent on low-emissions gasoline, the basis was Section 5 of the Federal Trade Commission Act.[2] The Unocal patent case also illustrates another nuance in the WTO patent rules. In some cases, the remuneration for non-voluntary use of a patent can be set to zero, when the use is to remedy an anticompetitive practice.[3] The facts in the Unocal case were described by the FTC as follows:

Unocal illegally acquired monopoly power in the technology market for producing Phase 2 “summer-time” CARB gasoline – a formulation of low-emissions gasoline mandated for sale and use in California for up to eight months of the year – by misrepresenting, among other things, that certain information was non-proprietary and in the public domain, while at the same time pursuing a patent that would enable it to charge substantial royalties if the information were used by CARB. As a result, if Unocal is permitted to enforce its patent rights, companies producing Phase 2 “summer-time” CARB gasoline would be required to pay royalties to Unocal to use the patented technology. According to Unocal’s own expert, approximately 90 percent of this royalty charge is likely to be passed on to California consumers through higher retail gas prices. Unocal’s enforcement of its RFG patents, according to the FTC, could thus potentially result in hundreds of millions of dollars per year in additional consumer costs as a result of Unocal’s exercise of its monopoly power.[4]

The patent dispute case was resolved by the FTC, Chevron and Unocal in 2005, as follows:[5]

Federal Trade Commission. FOR RELEASE. Dual Consent Orders Resolve Competitive Concerns About Chevrons $18 Billion Purchase of Unocal, FTCs 2003 Complaint Against Unocal. In Major Victory for Consumers, Unocal to Halt Enforcement of Reformulated Gasoline Patents; Will Release Relevant Patents to the Public. June 10, 2005
. . .
The Merger Complaint

The FTC’s complaint concerning Chevron’s proposed acquisition of Unocal alleges that the transaction would be anticompetitive and in violation of Section 7 of the Clayton Act and Section 5 of the FTC Act. The Commission’s anticompetitive concerns relate to Chevron’s potential acquisition and enforcement of the relevant reformulated gasoline patents. According to the complaint, the merger would substantially lessen competition in the refining and marketing of CARB reformulated gasoline, as Chevron would acquire the relevant Unocal patents through the acquisition and would be able to use its position to coordinate with its downstream competitors, to the detriment of consumers.

The FTC’s investigation of Chevron’s proposed acquisition of Unocal also led to the conclusion that without the relief imposed by the consent orders, Chevron’s ownership of Unocal’s reformulated gasoline patents likely would result in even greater competitive harm to downstream consumers than would occur if the patents remained in Unocal’s hands. In addition to the royalties that Unocal threatened to collect upon enforcement of the patents, Chevron’s ownership of Unocal would enable it to coordinate interaction among downstream refiners and marketers of CARB gasoline.

The Consent Orders

Under the terms of the consent orders Chevron and Unocal will cease enforcing Unocal’s relevant patents, will not undertake any new enforcement efforts related to the patents, and will cease all attempts to collect damages, royalties, or other payments related to the use of any of the patents. These obligations will become effective on the date Chevron’s acquisition is consummated. Within 30 days of the effective date of the merger, the companies will file the necessary documents with the U.S. Patent and Trademark Office to disclaim or dedicate to the public the remaining term of the relevant U.S. patents.

In addition, the companies will dismiss all pending legal action related to alleged infringement of the patents, including the two actions currently pending before the U.S. District Court for the District of California. Finally, the orders contain standard record-keeping and reporting requirements to ensure the companies’ compliance with their terms. The companies also must distribute copies of the orders to relevant parties. The orders will expire 20 years after the date they become final.
. . .

The FTC and DoJ have ordered compulsory licenses to technologies as diverse as tow trucks[6], pharmaceutical drugs, seeds, and software, and have used compulsory licenses not only for patents, but also to use trademarks, copyrights, pharmaceutical test data and know-how, as a remedy to anticompetitive acts.

Another group of US cases related to injunction proceedings followed a 2006 U.S. Supreme Court decision in eBay v. MercExchange, which limited the grant of injunctions for patent infringement to cases where a compulsory license on the patent (sometimes referred to as a running royalty) is a more equitable outcome than the grant of an injunction to prevent ongoing infringement. Among the many compulsory licenses used as a remedy for patent infringement are several cases infringing medical devices, and for such non-emergencies as patents of set top boxes for digital television, automatic transmissions for energy efficient hybrid automobiles, and Microsoft Office, to mention a few.

The United States uses a different legislative framework to permit non-voluntary uses of patents “by or for” the U.S. government, including for services and goods provided by private contractors, under 28 USC § 1498, and not only for emergencies, but also for technologies and software, including the use of BlackBerry mobile phones.

State governments are not liable for damages for patent or copyright infringement in the United States, an issue discussed also in an attached KEI Policy Brief on non-voluntary use of patents for hepatitis C virus (HCV) treatments.[7]

Michael Froman’s 2013 decision to lift injunction on infringing Apple iPads and iPhones.

To further illustrate the point: in 2013, USTR head Ambassador Michael Froman issued a de facto compulsory license when he lifted an injunction against Apple Inc. that had barred the company from using Samsung patents in its tablets and smartphones.[8] Ambassador Froman explained that his action was based upon the concern for “the effect on competitive conditions in the U.S. economy and the effect on U.S. consumers.” Going forward, Froman asked the ITC to consider if an injunction in cases involving patent infringement “is in the public interest,” in the context of having just overturned the ITC injunction that had sought to bar importation from China of infringing IPhones and IPads. A copy of the four page August 3, 2013 Froman letter overturning the ITC injunction is attached.


In October 2009, President Rafael Correa issued Decree 118, grounded in the country’s own constitution as well as Article 31 of TRIPS and the Doha Declaration, declaring that access to medicines “used in the treatment of diseases which affect the Ecuadorian population” were of public interest, and that compulsory licenses were thus authorized for “patents for use on human beings which are necessary for their treatment.”[9] The Presidential Decree focuses on people and access, not in the context of an emergency only, but in terms access more generally and the human right to health care and a mechanism to reduce the cost of medicines. A copy of the Presidential Decree, translated by WIPO, is reported here:

(Translation provided by WIPO, 2012)

Presidential Decree No. 118



under Article 32 of the Constitution of the Republic, health is a right guaranteed by the State and its realization is linked to the exercise of other rights that provide support for collective wellbeing;

under Article 3.1 of the Constitution of the Republic, the State has a fundamental duty to guarantee, without any discrimination whatsoever, the effective enjoyment of the rights established in the Constitution and in international instruments, in particular, rights recognized by the Constitution, such as health;

under article 363(7) of the Constitution of the Republic, in order to establish the collective wellbeing regime, in the field of health the State is duty-bound to “guarantee the availability of and access to safe and effective quality medicines, regulate their marketing, and promote the national production and use of generic drugs that meet the epidemiological needs of the population. With respect to access to medicines, public health interests shall prevail over economic and commercial interests.”;

Article 31 of the standards concerning the availability, scope and use of Intellectual Property Rights contained in the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement of the World Trade Organization (WTO) recognizes the right of countries to issue compulsory licenses for medicine patents which may serve to combat and mitigate the effects of diseases of public interest;

the Doha Declaration on the TRIPS Agreement and Public Health, unanimously adopted by the Members of the World Trade Organization, specifies that each Member “has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted”. Furthermore, the above-mentioned Declaration states that the TRIPS Agreement should be interpreted and implemented to “promote access to medicines for all”;

Paragraph 20 of the Global strategy and plan of action on public health, innovation and intellectual property, WHA 61.21, of the World Health Assembly states that “Intellectual property rights do not and should not prevent Member States from taking measures to protect public health.”;

Objective No. 3 of the National Development Plan 2007-2010, enacted through Executive Decree 745 of April 7, 2008, is: “To increase the life expectancy and improve the quality of life of the population”;

the Andean Standard provided for in Decision 486, which establishes the Common Intellectual Property Regime, makes provision for a Compulsory Licensing Regime, as does Ecuador’s Law on Intellectual Property; in order to meet this objective, the above-mentioned National Development Plan establishes policy 3.3 “To ensure universal access to essential medicines, strengthening State authority and sovereignty in the management of medicines and herbal remedies”, one of the strategies being the use of compulsory licenses as an instrument for reducing the cost of medicines;

it is in the State’s interest, in the field of public health, to safeguard equitable access to healthcare and consequently to medicines, in particular for the most vulnerable social and economic groups.

exercising the powers conferred by indents 1 and 3 of Article 147 of the Constitution of the Republic and the provisions of Article 65 of Decision 486 of the Andean Community of Nations:


Article 1.- Declaring of public interest access to medicines used in the treatment of diseases which affect the Ecuadorian population and which constitute a priority in terms of public health, and consequently authorizing the issuing of compulsory licenses for patents for medicines for use on human beings which are necessary for their treatment. Cosmetic and aesthetic medicines and bathroom products and, in general, those medicines that are not used to treat diseases, shall not be deemed to be a public health priority.

As noted in the PhRMA submission, thirty-two overall applications for compulsory licenses, nine were issued by Ecuador between the years of 2009 and 2014, on a total of seven drugs — for HIV, cancer, kidney transplants, and rheumatoid arthritis. These were as follows:

INN Brand Name Company Indication
lopinavir + ritonavir Kaletra AbbVie (US) HIV/AIDS
ritonavir Norvir AbbVie (US) HIV/AIDS
sunitinib Sutent Pfizer (US) Cancer
etoricoxib Arcoxia Merck (US) Rheumatoid Arthritis
abacavir + lamivudine Kivexa ViiV (UK, US, Japan) HIV/AIDS
mycophenalate sodium Myfortic Novartis (CH) Organ transplant
certolizumab Cimzia UCB (Union chimique belge) (BE) Rheumatoid Arthritis, Crohn’s disease

Ten of the thirty-two applications were filed by Ecuador’s public pharmaceutical firm, ENFARMA. ENFARMA was created, under Ecuador’s Executive Decree 181, specifically for the purposes of implementing the policy created by Decree 118.

According to the Instituto Ecuatoriano de la Propiedad Intelectual (IEPI), eleven licenses remain pending, with the remainder having been rejected or desisted.

PhRMA’s objection to the remaining pending compulsory licenses in Ecuador creates some possible confusion as to the number of drugs that are subject to licenses.

Of the eleven pending licenses, nine are for the medicines previously licensed, listed above.[10] For example, there are three pending licenses for patents for Ritonavir;[11] yet, as shown in the table above, Ecuador has already granted compulsory licenses related to Ritonavir. There are only two new medicines at issue of the eleven pending licenses, both used to treat HIV. One is owned by a German firm, and the second by a joint venture that is dominated by GSK, a UK based firm. These are as follows:

INN Brand Name Company Indication
tripanavir Aptivus Boehringer-Ingelheim (DE) HIV
abacavir Ziagen ViiV (UK, US, JP) HIV

A majority of the compulsory licenses issued or pending involve products owned by European firms. For example, the patents on mycophenalate sodium involve the active ingredient in Myfortic, a drug marketed by the Swiss company Novartis. The patents on tripanavir are associated with the brand name drug Aptivus, sold by German-owned Boehringer-Ingelheim. Cimzia is owned by the Belgium based UCB (Union chimique belge). Kivexa and Ziagen are both owned by ViiV Healthcare, a company owned 76.5 percent by the the UK based GlaxoSmithKline, 10 percent by the Japan based Shionogi and 13.5 percent by Pfizer.

Arcoxia, a Merck product, is not approved for sales in the United States.

Both AbbVie’s products, Norvir (ritonavir) and Kaletra (ritonavir+lopinavir) were developed on an NIH grant.

Sutent/sunitinib, a drug sold by Pfizer, is priced at more than $13,000 per month in the United States for some indications. Pfizer acquired the rights to sunitinib from Sugen, a small company, which in turn had licensed technology from New York University.[12]

Ecuador’s actions were designed to promote access to medicine for all

In 2013, Ecuador had per capita income of $5,760 (GNI per capita, Atlas Method). This is considered “upper middle income” by the World Bank, but was just 10.8 percent of the United States per capita income for the same year. Imagine if you experienced an 89.2 percent decrease in pay, and had to buy one of these drugs — the motivation for the compulsory license should be clear.

USTR has congratulated itself for its support of the WTO Doha Declaration on TRIPS and Public Health. USTR should not at the same time object to a policy in Ecuador that is both in compliance with the TRIPS agreement, and, within that constraint, actually designed “to promote access to medicines for all.”



2. 5 U.S. Code § 45 – Unfair methods of competition unlawful; prevention by Commission
(a) (1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.

3. TRIPS, Article 31(k), . . . The need to correct anti-competitive practices may be taken into account in determining the amount of remuneration . . . “

4. FTC. FOR RELEASE. FTC Reinstates Complaint of Unfair Methods of Competition Against Unocal. July 7, 2004. Available at



7. 2014:1 KEI Policy Brief: Non-voluntary use of patents for drugs to treat the Hepatitis C Virus in the United States: Mechanisms available to the Federal Government, State Governments and Private Actors. July 18, 2014

8. Michael Froman’s decision in the Apple/Samsung ITC patent dispute and the USTR trade agenda, August 5, 2013. /node/1785 Includes a copy of the August 3, 2013 letter.

9 Declaration No. 118, Rafael Correa Delgado, Constitutional President of the Republic. Available at

10. These include patents for mycophenalate sodium (Patent No. SP-97-2078); ritonavir (Patent No. Pl-97-1142); sunitinib (Patent No. Pl-07-1872); abacavir + lamivudine (Patent Nos. Pl-99-1616 and Pl-08-1913); lopinavir/ritonavir (Patent No. Pl-97-1142); abacavir (Patent No. Pl-08-1913); and etoricoxib (Patent No. Pl-99-1639).

11. According to one earlier study done for WIPO, there are over 800 patent families in Ritonavir. See



August 3, 2013, letter from Michael Froman to ITC

2014:1 KEI Policy Brief: Non-voluntary use of patents for drugs to treat the Hepatitis C Virus in the United States: Mechanisms available to the Federal Government, State Governments and Private Actors. July 18, 2014

2014:1 KEI Research Note: Recent European Union Compulsory Licenses. March 1, 2014

2014:2 KEI Research Note: Recent United States Compulsory Licenses. March 7, 2014