Questioning the Frequency and Wisdom of Compulsory Licensing for Pharmaceutical Patents

Many advocates for using compulsory licensing (CL) for pharmaceutical patents in developing countries like Thailand rest their case in part on the purported use of CL in the United States. In this Article we take issue with that proposition on several grounds. As a textual matter, the “commercially reasonable terms” language in Article 31 of TRIPS, even when qualified by the Doha declaration, prevents any host nation from using whatever royalties it wants in its CL arrangements, especially those that are below marginal cost. As a theoretical matter, we argue that the basic presumption in favor of voluntary licenses for intellectual property (IP) should apply in the international arena, in addition to the domestic one. In the international context, voluntary licenses are of special importance because they strengthen the supply chain for distributing pharmaceuticals and ease the government enforcement of safety standards. Next, this Article analyzes several of the key illustrations of purported CL for drug patents in the United States and shows that the use of CL elsewhere deviates in material ways from the standard US practices. These are the compulsory copyright licenses for music, the limited statutory exemptions for pharmaceuticals and medical procedures, the award of damages instead of injunctions after eBay Inc v MercExchange, LLC, government takings, and the use of compulsory licenses in antitrust settlements. Whatever the ultimate desirability of these American doctrines, none of them seeks to reduce the payment on licenses to the marginal cost of the licensed goods. Any need to help poor people gain access to vital drugs should not rely on CL, but instead should rely on tools precisely aimed at that purpose, including direct government purchases of patented drugs from their manufacturers at negotiated prices.