COVID-19: governments look to shield companies from IP enforcement
A large effort is underway globally to ensure that there are enough mechanical ventilators available to treat patients during the peak of the coronavirus pandemic. Medical devices such as ventilators are typically protected by intricate portfolios of IP rights, with patents playing a key role in that protection.
Due to the vast scale of the medical device business it is common for companies to pursue patent protection for their devices in as many countries as possible and to use whatever tactics are available to prolong their protection as far as possible.
This increases the chance that relevant patents may exist in many countries around the world whose governments are desperately trying to source ventilators. In some countries, such as the UK, the government has contracted a number of high-tech companies to rapidly produce mechanical ventilators to meet the need that existing suppliers cannot.
The UK government recently announced an indemnity for contractors rapidly manufacturing ventilator systems, that is most likely intended to be used under the UK’s Crown Use provisions. Crown Use provisions allow the UK government to authorise a party to work within the scope of existing IP rights in an emergency, such as “for the maintenance of supplies and services essential to the life of the community”. Because these provisions are reserved for exceptional situations they have been deployed only rarely.
An undisclosed amount of indemnity funding is being set aside to cover anyone with a genuine claim of infringement who should then be able to collect reasonable compensation from the UK government instead of suing the contractor. This helps to balance the pressing need for ventilators with respect for any IP rights that might be infringed.
It allows the contractors to get on with their urgent task of manufacturing ventilator systems and parts without fear of legal action, but it also ensures fair compensation for any companies that may own an IP right that is infringed by this emergency manufacturing work. Additionally, it helps to ensure that companies do not price-gouge these essential products.
Narrow scope
The government has not indicated whether it is aware of any specific IP rights that could be affected, but the scope of the indemnity is very narrow so the vast majority of IP rights holders should not necessarily be concerned that this action is in some way undermining the IP system more widely.
The UK government is not alone in taking this kind of action. The Israeli government recently exercised its corresponding law to authorise acts relating to an antiviral drug under three patents, and the Bundestag in Germany has just extended its corresponding powers to the Ministry of Health, signalling that it intends to follow suit—even though Germany has never used these legal provisions before.
This highlights how unique the present situation is and how each government will be conscious to exercise these powers only when absolutely necessary. For example, we may see these provisions used when a vaccine eventually becomes available.
The indemnity put forward by the UK government will effectively provide humanitarian and economic aid at the same time. If loss of life and economic harm can be avoided simultaneously then it is a win-win scenario. Lots of businesses are choosing to act philanthropically during this crisis so they may choose not to lodge any compensation claims.
Most businesses have an interest in bringing an end to the pandemic because they will be able to resume trading under more normal conditions. Large companies will also be quietly grateful for any positive publicity they have gained during the crisis.
Tread carefully
However, if there are any small businesses that depend solely or disproportionately on relevant IP then they may think seriously about coming forward to claim the reasonable compensation available under this scheme. Small businesses may not have the same financial means to endure the cost of the present disruption and philanthropically donate expensive medical equipment.
Unless the compensation process is kept behind closed doors, these businesses will need to carefully weigh up making a claim against the risk of a public backlash if they are seen to be profiting from the crisis.
Some opportunistic companies may try to weaponise the potential for public backlash against those trying to enforce their IP rights, in order to commit infringing acts under the pretence of helping fight the pandemic. As nearly everyone is experiencing an economic downturn right now, this could be tempting for some businesses who want to improve their position when the market resumes after the crisis. However, this concern is inherent to the crisis itself and is not linked to the present government interventions.
Ultimately there are three players in this analysis: those responding to the crisis, the relevant IP holders, and the IP system itself. The key to achieving an optimum outcome for everyone under the present circumstances is to prevent the existence of IP rights hindering the emergency response, while also ensuring fair compensation where it is due to prevent undue economic damage.
The present UK government proposal seems to be well judged to ensure that the IP system, which is intended to reward and promote innovation, experiences only a limited and temporary disruption of normal service.
Andrew Pitts is an associate at Mewburn Ellis. He can be reached at andrew.pitts@mewburn.com
