A trade-off with the World Trade Organization: vaccine patents


10th May 2021

President Biden confirmed a u-turn on 5 May on the US's previous position in respect of the patents on Covid vaccines, stating that the US now support a waiver of the patent protection afforded to the vaccine. A press release from his administration states that extraordinary circumstances call for extraordinary measures.

Whilst we can all see the urgent need to deal with the virus on a worldwide basis, and why countries such as South Africa and India are pushing for such measures, stocks in Moderna, Novavax and Pfizer immediately fell. Let's look at why.

Patent system rationale

The entire rationale of the patent system is based on a trade-off with inventors. In return for publishing details of their inventions, they are rewarded with time-limited monopoly rights over the invention. This ensures that, after the expiry of the patent, the inventions are freely available to use, and improve upon.

Patents are available for new inventions that are capable of industrial application, which includes mechanical devices, methods for doing things, chemical compounds and mixtures of compounds. Patents can’t protect ideas or general know-how.

In the UK (and the EU), patents last for 20 years from being filed (subject to being renewed). Patents for certain medicinal products can be extended for up to a further five years depending on when they were authorised for marketing.

Value of the patent

The value of the patent to a business can be huge. Not only does it provide the inventor with a monopoly right, but the mere fact that an application has been made can sometimes deter competitors from investing in similar technology for fear that the investment will be futile should the patent application be successful.

In addition, the patent is an asset to the business that can be licensed out to third parties, used as security for lending and attributed a value in the company accounts. In the pharmaceutical industry in particular, where the initial research investment is often high, the value of a patent and the exclusivity it provides is often huge.

Negotiations needed

With this in mind, any waiver of the intellectual property rights already granted in respect of Covid vaccines is likely to be the subject of some delicate negotiations and the World Trade Organization have already confirmed that it would only be a temporary measure (although how temporary would presumably depend how long it would take to ensure the vaccines are fully available in all countries and how often it transpires dosage needs to be repeated). Whilst the pharmaceutical companies benefited from a lot of public funding for the research they undertook, they have already seen a financial impact on their shares after Joe Biden’s announcement.

Any agreement on this with the World Trade Organization will require a consensus from its 164 members. The UK’s stance so far has been to stress that the protection afforded by the intellectual property system is required to incentivise companies and, whilst the UK supports volume licensing and technology transfer agreements to make the vaccines more widely available, we have not so far supported the idea of a waiver of these rights. Europe, and another countries such as Canada, currently take the same view.

It remains to be seen what the effect of a widely publicised change of position by the US will be, but it certainly seems that there will be a lot of further debate on this issue.

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