Clifford Chance

The Decision

In October 2020, India and South Africa submitted a widely noticed proposal to the WTO: Patent protection should be temporarily suspended for all technologies aiming at preventing, containing, and/or treating COVID-19, arguing that the patents would reduce the ability of countries to ensure the supply of vaccines as well as medical devices necessary to combat COVID-19. 

The initial proposal was co-sponsored by 62 states, who submitted a revised proposal in May 2021, narrowing the scope of the waiver in relation to COVID-19 to health products and technologies. Previously, the US had expressed its support for waiving intellectual property protections for COVID-19 vaccines, and its willingness to engage in negotiations. The EU, on the other hand, contested that intellectual property rights issues had been a barrier in relation to COVID-19 related medicines and technologies, and responded to the proposal by submitting a counterproposal to the TRIPS waiver, suggesting other possible responses to vaccine shortage. Later, the EU issued a Draft General Council Declaration on the TRIPS Agreement and Public Health in the Circumstances of a Pandemic, elements of which were eventually included in the final Decision.

In November 2021, WTO Director-General Ngozi Okonjo-Iweala and Deputy Director-General Anabel Gonzales initiated a series of informal negotiations with stakeholders from the EU, US, India and South Africa, a group that later became known as "the Quad". The group was able to agree on a compromise for a draft decision text, which was tabled in May 2022. 

In comparison with the original proposal, the draft significantly reduced the scope of the patent waiver. While the original waiver proposal provided for full freedom for WTO members to remove intellectual property barriers on all COVID-19 response tools, the draft decision text was limited to vaccines and excluded therapeutics and diagnostics. It also made the patent waiver subject to the condition of demonstrating that compulsory licencing is necessary for a country's COVID-19 response, thus going beyond the requirements of the TRIPS Agreement itself.¹

The draft, excluding a paragraph allowing for the issue of a single authorisation list, was adopted by the WTO member states during the 12th Ministerial Conference on 17 June 2022. The Decision allows all "developing countries"² over the next five years to permit the use of the subject matter of any Corona vaccine patent without the consent of the right holder through any instrument available at local law level, such as executive orders, emergency decrees, government use authorizations, and judicial or administrative orders - regardless of whether a member state has a compulsory licensing regime or not. 

The manufactured products may also be exported to developing countries members. However, the patent holder may still be entitled to an "adequate" remuneration. In interpreting adequacy, considerations such as the humanitarian and non-profit purpose of specific vaccine distribution programs must be taken into account.

What is the significance of the Decision?

Germany

The German government opposed the proposal to suspend patent protection of COVID-19 vaccines for the most part, emphasising its general support for vaccine supplies and global accessibility of vaccines, but contending that patent waivers were not an effective tool to reach this goal. Considering production capacity and quality control rather than intellectual property rights the main impediments to access to vaccines, the government in early 2021 stated that "the protection of intellectual property is a source of innovation and must remain so in the future" and that the "lifting of patent protection for COVID-19 vaccines has significant implications for vaccine production as a whole".³

In Germany, the public debate about a patent waiver for vaccines was not only driven by parliamentarians and NGOs, but also by pharmaceutical and biotechnology industry associations, whose arguments carried substantial weight due to the significant market force of the German vaccine producer BioNTech. They warned that a patent waiver could severely damage their industries without solving the global vaccine shortage.⁴    

The key arguments they brought forward against patent waivers were, firstly, that these would discourage research and depreciate companies for which the technological knowledge constitutes a significant value. Rather than constituting an obstacle to global availability of the vaccine, patent protection would enable companies to invest in research in the first place, with the considerable value of the patents providing an indispensable incentive for entrepreneurial activity in research and development of vaccines. Furthermore, a patent waiver would not tackle other, more immediate causes for low vaccination rates in economically weaker states, such as distribution problems, shortages of skilled workers and weak health systems. According to these associations, focus should instead be placed on cooperation between states and companies in the production of vaccines, as well as on the global expansion of production sites. Various production partnerships of this kind have already been established on a voluntary basis.⁵  

In legal literature, the necessity of a patent waiver was also questioned in light of the existing legal framework. German patent law provides for the issuance of a patent use order by the Government in the interest of public welfare. With an amendment of the German Infection Protection Act in May 2020, the German legislator had also clarified that vaccines are explicitly among the products that can be covered by this type of order. In addition, the German Patent Act also entails a mechanism for compulsory licensing to be obtained before a patent court. 

Nevertheless, a number of parliamentarians – including the heads of the green and left parties, as well as the current Minister for Health Karl Lauterbach – expressed their support for the patent waiver from the outset. In February 2022, the left party DIE LINKE put forward a motion in parliament, petitioning to support the TRIPS waiver and make patent holders and manufacturers grant licenses and transfer technological know-how. The motion was, however, rejected by a vast majority of 498 to 117 votes. Afterwards, chancellor Olaf Scholz made clear that he did not support the waiver, reasserting that patents were a crucial tool for encouraging research. He agreed that the transfer of vaccine production facilities to the respective states would be a more effective measure for making vaccines accessible in emerging economies.⁶ In the end, Germany only voted in favour of the TRIPS waiver after the proposal had been significantly weakened. 

In reaction to the Decision, the German Association of the Pharmaceutical Industry – which represents more than 270 companies in the field – reiterated its criticism of a patent waiver, stating that the waiver would not solve the current challenges in global vaccine supply or make vaccines available more quickly on a global scale. The production of vaccines as a highly complex process would not only require technology and training facilities, but also years of practice in handling the relevant technology before safe, high-quality and highly effective vaccine would be available.⁷  In retrospect, this argument is supported by the fact that at the height of the pandemic, most patents had not yet been granted and therefore no injunctive relief could have been obtained on this basis, only monetary compensation. However, even under the WTO Decision the payment of an adequate remuneration is not precluded if patent protection is suspended.

United Kingdom

Prior to the Decision, the proposed waiver of patent rights required for the production of COVID-19 vaccines was initially opposed by the UK and EU Governments. This was on the basis that the existing IP rights legal framework already played a positive role in generating innovative COVID-19 vaccines and incentivised pharmaceutical companies to address novel variants by rewarding innovators with IP rights that could be monetised. Following publication of the Decision in June 2022,  ministers on behalf of the UK Government described the Decision as "good" but added that it had "seen no evidence that IP rights, including the protection of undisclosed information or trade secrets, are any barrier to accessing treatments for Covid-19.⁸"

Despite the tepid support of the UK Government, commentators from UK-based charities and NGOs have expressed concerns that the Decision is insufficient as a means of tackling vaccine inequality as it covers vaccines but not related technologies, treatments or tests.⁹ In contrast, others believe that the Decision is too far reaching with certain UK Government representatives voicing concerns that pharmaceutical companies may be deterred from investing in new research and development schemes if they are unable to reap the full financial benefits of their research and development efforts. Further, the scope of the waiver under the Decision relates specifically to patents concerning COVID-19 vaccines.¹⁰ However, to achieve scale-up of vaccine manufacturing capacity to reduce scarcity of vaccines in developing nations, those developing nations will likely also need access to technical know-how and trade secrets to enhance manufacturing capabilities. Indeed, such critical information may not be contained within a patent but may instead be kept confidential by the rightsholder as know-how or a trade secret which may only be lawfully utilized with an appropriate licence from the relevant rightsholders. Therefore, the Decision alone may not be enough to accelerate manufacturing processes or increase access to COVID-19 vaccines if developing nations are unable to access the necessary information to utilise the technology covered by the relevant patents. 

On balance, the Decision has been viewed by UK policymakers as a positive step in addressing the unequal distribution of COVID-19 vaccines worldwide, however, the UK Government has commented that the Decision should not be viewed as a "crutch" by which to solve shortages and inequalities in the global supply chain. For instance, the UK Government has also encouraged the voluntary licensing of COVID-19 vaccines to encourage those facing vaccine shortages to manufacture additional doses. Further, it has supported the Ottawa Group's Trade and Health Initiative,¹¹ which calls on developed countries to restrict their use of export restrictions and to suspend certain tariffs of medicinal products as an alternative. Taking into account the mixed opinions provided by UK Government representatives, it is not clear at this stage if the Decision will be accompanied with supporting legislation in the future. For now, stakeholders operating in the pharmaceutical industry should watch this space for future developments. 

China

Whilst the restriction of waiver eligibility to those developing countries that exported more than 10% of the world's vaccine doses in 2021 was not adopted in the final text of the Decision, and as a result  China’s “developing country” status in the WTO makes it eligible to take advantage of the Decision, China announced at the WTO General Council meeting on 10 May 2022 that it will not avail itself of the flexibilities granted under the Decision. Thus, China Patent Laws continue to apply to anyone who desires to use the subject matter of any relevant patent registered in China for the production and supply of COVID-19 vaccines. 

The announcement shows China's support for the Decision and global anti-pandemic efforts, specifically concern for the availability and affordability of vaccines, treatments and technologies in developing countries. This is illustrated by the Decision expressly stating that eligible members with COVID-19 vaccine manufacturing capacities are encouraged to make voluntary but binding statements not to make use of the Decision and refers specifically to the meeting date when China made such statement.  Further, eligibility was a point of contention during the negotiations between member countries, with disagreement on whether all developed countries should benefit from the patent use consent waiver. China's objection to the proposed exclusion criterion based on percentage of global vaccine exports was that applying such criterion in these difficult times constitutes a tolerance for inward looking policies and should be avoided.  Finally, China’s role in the global pandemic response has also been a proactive one; it has provided more than 2.2 billion doses of vaccine to over 120 countries and US$2 billion in aid in support of technology transfer.  

The Decision will unlikely affect the competitiveness or market share of China’s most widely used vaccines in the international market.  China’s two most widely used COVID vaccines are traditional inactivated-virus vaccines (i.e. CoronaVac by Sinovac and BBIBP-CorV by Sinopharm).  Most developed countries with vaccine manufacturing capabilities have been producing vaccines using viral vector technology (e.g., Astra Zeneca and Johnson & Johnson) and/or the new mRNA technology (e.g. Pfizer).  

The rapidly evolving pharmaceutical landscape in China is evident from its rapid growth and the fact that it is the world’s second largest pharmaceutical market, following the United States.  Biopharmaceuticals and high-performance medical equipment are one of the ten priority sectors identified in the “Made in China 2025” strategic plan initiated in 2015.  In the “Guidelines for Building a Powerful Intellectual Property Nation (2021-2035)” released by the State Council, the goal is to have patent-intensive industries account for 13% of China’s GDP by 2025.  It will be interesting to see what stance China will take in the future at international policy debates including those involving global public health issues when at odds with its goals to become an intellectual property superpower.   

Conclusion

While WTO member states have expressed their general sympathy for the inherently altruistic goal of the Decisions to provide broad access to potentially lifesaving vaccine technology in times of crisis, industrial nations like Germany, the UK and China favor patent protection over compulsory measures against patent holders for various reasons. In particular, a waiver would not solve the underlying issue that mere (statutory) use rights under a patent do not necessarily enable the user to efficiently apply the patented technology since additional confidential know-how and trade secrets of the patent owner/developer are usually required (licensed alongside the patent). Waiving patent rights might therefore tempt users of such patents to rely on less efficient, less safe know-how – which could lead to even greater health risks for the public. It remains to be seen which measures Germany, the UK and China (as well as other countries) will take to provide for an ethical, but still (commercially and from a safety perspective) reasonable access to COVID-19 vaccines in the future. 

¹ International Institute for Sustainable Development, "TRIPS Waiver Negotiations Go Down to the Wire in the Run-Up to MC12" (7/6/2022) https://www.iisd.org/articles/policy-analysis/trips-waiver-negotiations-mc12

² WTO members announce for themselves whether they are "developed" or "developing" countries; however, other members can challenge the decision of a member to make use of provisions available to developing countries, see also https://www.wto.org/english/tratop_e/devel_e/d1who_e.htm

³ Deutsche Welle, "Germany rejects US push to waive COVID vaccine patents" (06/05/2021) https://www.dw.com/en/germany-rejects-us-push-to-waive-covid-vaccine-patents/a-57453453

⁴ Deutscher Bundestag, Streit über patentgeschützte Corona-Impfstoffe, https://www.bundestag.de/dokumente/textarchiv/2022/kw07-pa-gesundheit-880116

⁵ Deutscher Bundestag, Streit über patentgeschützte Corona-Impfstoffe, https://www.bundestag.de/dokumente/textarchiv/2022/kw07-pa-gesundheit-880116

⁶ Reuters, "Germany speaks out against COVID-19 vaccine patent waiver" (28/03/2022) https://www.reuters.com/world/europe/germany-speaks-out-against-covid-19-vaccine-patent-waiver-2022-03-28/

⁷ Bundesverband der Pharmazeutischen Industrie e.V., "BPI zum TRIPS Waiver: WTO-Einigung ist nicht zielführend" (17/06/2022) https://www.bpi.de/de/nachrichten/detail/bpi-zum-trips-waiver-wto-einigung-ist-nicht-zielfuehrend

⁸ TRIPS Agreement: Vaccines – debated on Monday 11 July 2022. 11 July 2022. Hansard. https://hansard.parliament.uk/Lords/2022-07-11/debates/405DF6CF-F2B6-4783-B68C-437F6E1D26BF/TRIPSAgreementVaccines

⁹ https://www.oxfam.org/en/press-releases/wto-agrees-deal-patents-covid-vaccines-campaigners-say-absolutely-not-broad https://www.oxfam.org/en/press-releases/wto-agrees-deal-patents-covid-vaccines-campaigners-say-absolutely-not-broad

¹⁰ https://hansard.parliament.uk/Lords/2022-07-11/debates/405DF6CF-F2B6-4783-B68C-437F6E1D26BF/TRIPSAgreementVaccines

¹¹ "The UK welcomes the Ottawa Group's Trade and Health Initiative", 16 December 2020 (Gov.co.uk), https://www.gov.uk/government/news/the-uk-welcomes-the-ottawa-groups-trade-and-health-initiative (accessed 24 August 2022)