Crown Use In New Disease And Old Remedy Presented by: Professor David Musker, Centre for Commercial Law Studies Date: Tuesday 16th June 2020 What is Crown Use? - UK Government's right to use patents, registered and unregistered UK - And to authorize others to use "for the services of the Crown" - e.g. agents, contractors, suppliers - Not a "compulsory license" but a reservation within the patent grant - Requires compensation to the patentee - Two types: • "Normal"  ss.55-56 by government department, can be retrospective • "Emergency"  s.59 - Order in Council declaring an emergency A Selective History - Originally, the Crown could not infringe patents it granted. - Statute of Monopolies 1623, VI: "sue as aloe they be not contrary to the Lawe nor mischievous to the State, by raising prices of Commodities at home, or hurt of Trade, or generally inconvenient" - - 1883 - Crown Use created by Gladstone's Liberal government: • Limiting immunity to use "for the services of the Crown", • Extending it to authorized contractors and agents, and • Requiring compensation to be paid. 1961-64-Crown use used by Macmillan Conservative Government to buy generic imported chloramphenicol, chlorothiazide, tetracycline Unsuccessful challenge in Pfizer v Minister of Health. and oxytetracycline. - 1966 - Wilson Labor government ceases Crown Use for medicines - 1968-Wilson Labor government amendment adds GP and pharmaceutical services & sales of drugs (now in s.56) following Sainsbury Committee's recommendation. Minister quotes The Times: "Proprietary tetracycline is marketed at present at about £45 for 1,000 tablets. Last year, imported tetracycline was sold to the hospitals at about £6 10s. for 1,000, and the new contract may bring the figure down to about £4-£5 for 1,000" - 1973-Banks Committee recommends retention of Crown Use but abolition of compulsory licensing of pharmaceuticals. - 1978 - Patents Act 1977 enacts Banks Report - 1988 - Area Health Authorities held to be a "government department" in Dory v Sheffield HA - 1999 - Building hardened police station in NI is "Crown Use" in Henry Bros (Magherafelt) v MOD - 2009 - Undecided whether police were a "government department" in Cellxion v MMS - 2020 - Emergency mobile phone network (activated by Police Commander at request of Cabinet Office) is Crown Use: IP com v Vodafone [2020] EWHC 910 (Pat) - 2020 - "... a novel pandemic disease; but if that happened then the Government could invoke Crown Use" (Evalve v Edwards, Birss J) Pfizer v MoH [1965] RPC 261 - "The natural meaning of use for the services of the Crown is use by members of such services in the course of their duties." (LORD REID) - Scope of Crown Use can change with scope of government functions - Does not have to be for the Crown's own benefit - can be for public benefit - Organizational structure is relevant: nationalized industries not included - Hospital in-patent and out-patient services included - Sales not generally included, but prescription <> sale - Obiter. GP services under Part IV of the NHS Act not included (not in contention between the parties) - Powerful dissent by LORD WILBERFORCE The Banks Report - "... in reaching the conclusions which follow, we have attempted, in so far as the patent system is relevant to the problem, to reconcile the need for low-priced existing drugs with the potentially conflicting need for new remedies which are the products of expensive and lengthy research programs. - Nevertheless, in recognition of the strong protection which a patent for a drug can afford, we are certain that if the Department of Health is of the opinion that a drug patentee's prices are too high, taking all factors into account, it is in the public interest that a final sanction should be available to the Department whereby supplies of the drug can be obtained at competitive prices. However, we firmly believe that this result should be sought on a selective basis rather than by attempting to weaken patent protection for drugs overall. This would, we think, give the most just solution to the problem, in that only those manufacturers who exploited their patents in unreasonable fashion would stand at risk." A recent example ... ORKAMBI ™ - In April 2019, May Gov't Health PUSS Seema Kennedy was urged to invoke Crown Use in view of high pricing of this cystic fibrosis drug by US patentee Vertex - In July 2019, she said: "... Vertex remains an extreme outlier in both pricing and behaviors... Unless Vertex change their approach and behave responsibly, I have a moral obligation to look at these other options. Of course, NHS England and NICE will carry on their negotiations because that is the desired option, but I have no other option but to look at these other options on the table." - In September 2019, Labor published "Medicines for the Many", advocating Crown Use purchasing of ORKAMBI and other medicines - In October 2019, Johnson Gov't Health Secretary Matt Hancock announced: "The deal is great value for money for the NHS, and crucially, will improve thousands of lives. This deal - on the back of several others this summer - shows why we get some of the best value drugs in the world ..." Emergency Crown Use – s.59 - (1) During any period of emergency... the powers exercisable... shall include power to use the invention for any purpose which appears to the department necessary or expedient; • … • (b) for the maintenance of supplies and services essential to the life of the community; • (c) for securing a sufficiency of supplies and services essential to the well-being of the community; • (d) for promoting the productivity of industry, commerce and agriculture; • (e) for fostering and directing exports and reducing imports, or imports of any classes, from all or any • countries and for redressing the balance of trade; • (f) generally, for ensuring that the whole resources of the community are available for use, and are used, in a manner best calculated to serve the interests of the community; or • - … and any reference in this Act to the services of the Crown shall, as respects any period of emergency, include a reference to those purposes. Normal Crown Use – s.55 - (1) Notwithstanding anything in this Act, any government department and any person authorized in writing by a government department may, for the services of the Crown and in accordance with this section, do any of the following acts in the United Kingdom in relation to a patented invention without the consent of the proprietor of the patent, that is to say: • (a) where the invention is a product, may;  (I) make, use, import or keep the product, or sell or offer to sell it where to do so would be incidental or ancillary to making, using, importing or keeping it; or  (II) in any event, sell or offer to sell it for foreign defense purposes or for the production or supply of specified drugs and medicines, or dispose or offer to dispose of it (otherwise than by selling it) for any purpose whatever; • (b) where the invention is a process, may use it or do in relation to any product obtained directly by means of the process anything mentioned in paragraph (a) above; • (c) without prejudice to the foregoing, where the invention or any product obtained directly by means of the invention is a specified drug or medicine, may sell or offer to sell the drug or medicine; • (d) may supply or offer to supply to any person any of the means, relating to an essential element of the invention. for putting the invention into effect; - (2) In this Act, except so far as the context otherwise requires, "the services of the Crown" includes – • (b) the production or supply of specified drugs and medicines; and - and "use for the services of the Crown" shall be construed accordingly. - (4) For the purposes of section 55(1)(a) and (c) above and subsection (2)(b) above, specified drugs and medicines are drugs and medicines which are both; • (a) required for the provision of,  (AI) primary medical services under the National Health Service Act 2006, the National Health Service (Wales) Act 2006, part I of the National Health Service (Scotland) Act 1978 or any corresponding provisions of the law in force in Northern Ireland or the Isle of Man or primary dental services under the National Health Service Act 2006, the National Health Service (Wales) Act 2006, or any corresponding provisions of the law in force in Northern Ireland or the Isle of Man, or  (I) pharmaceutical services, general medical services or general dental services under Chapter 1 of Part 7 of the National Health Service Act 2006 or Chapter 1 of Part 7 of the National Health Service (Wales) Act 2006 (in the case of pharmaceutical services), Part II of the National Health Service (Scotland) Act 1978 (in the case of pharmaceutical services or general dental services), or the corresponding provisions of the law in force in Northern Ireland or the Isle of Man, or  (ii) Personal medical services or personal dental services provided in accordance with arrangements made under section 170 of the 1978 Act (in the case of personal dental services), or the corresponding provisions of the law in force in Northern Ireland or the Isle of Man, or  (ii) local pharmaceutical services provided under a pilot scheme established under section 134 of the National Health Service Act 2006, or section 92 of the National Health Service (Wales) Act 2006, or an LPS scheme established under Schedule 12 to the National Health Service Act 2006, or Schedule 7 to the National Health Service (Wales) Act 2006, or under any corresponding provision of the law in force in the Isle of Man. and • (b) specified for the purposes of this subsection in regulations made by the Secretary of State. Crown Use and COVID? - Current pandemic is clearly an emergency. Government could invoke the wide emergency powers under s59. • If it did so, it could make, import, have made, sell etc. any drug or apparatus required. • - It could also take measures to stave off the coming economic disaster. Even without this, Government could, without prior notice: • Authorize production or import and use of generic drugs and apparatus, together with ancillary sales; • - List drugs for generic sale direct to the public. No corresponding rights to use copyright or confidential information however. Isn't This Banned By TRIPS? - No. Government use of patents is permitted by Art 31. - Must first "make efforts to obtain authorization from the right holder on reasonable commercial terms and conditions" (b) – UNLESS • It is an emergency or circumstance of extreme urgency, OR • It is "public non-commercial use" (NOTE: NHS use, at least in hospitals, is arguably "non-commercial". Private, non-commercial use isn't an infringement anyway.) - Must be "predominantly for the supply of the domestic market" (f) (BUT NOTE new Art 31bis), and - "The right holder shall be paid adequate remuneration" ((h)- (j)). - DOHA Declaration • "The TRIPS Agreement does not and should not prevent Members from taking measures to protect public health." • "Each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency." What Would It Cost? - 3 circumstances: 1. Invention funded by UK government - practice is not to pay twice (s.58(3)(a)), so expect little compensation. 2. NPE: compensation on "willing licensee-willing licensor" basis - Patchett's Patent, Allen & Hanbury 3. Manufacturing patentee or exclusive licensee: s57A compensation taking into account lost profit, under-use of capacity. Untested, but could be expensive. What Does The Future Hold? - Australia amended in 2019 to introduce: • Requirement for prior negotiation (going further than TRIPS Art 31), and • Ministerial authorization. • Both powerful disincentives to invoking Crown Use • Justification: companies did not like being threatened with Crown Use - In March 2020, the Australian Labor Shadow Science Minister asked how Crown Use was being deployed in the COVID epidemic. - USTR negotiating objectives for a FTA with the UK include, for pharmaceuticals and medical devices, "government regulatory reimbursement regimes" that are - • Transparent and provide "procedural fairness", and • "Provide full market access for U.S. products" UK DTI March 2020 Paper "UK-US Free Trade Agreement" says that "The price the NHS pays for drugs will not be on the table".