Intellectual property must be transformed to put the public good before private profits
Patent enclosure by pharmaceutical giants results in many being denied life-saving treatments. It’s time for a new approach.
SOPA Images/SIPA USA/PA Images
30 July 2020
Last week, we came a step closer to a discovery for the vaccine to COVID-19, after Oxford University produced a safe version of a treatment that provided a strong immune response – a discovery that could probably be written on a small piece of paper, but would be one of the most valuable assets on the planet.
Such a finding marks an incredible moment, as societies grapple with the heart-breaking reality of this deadly virus. But the progression of this vital treatment also serves to highlight the fundamentally flawed approach to access to medicines and, specifically, the costly practise of patent enclosure by powerful and profitable pharmaceutical giants, resulting in many being denied life-saving treatments.
The vaccine in question is being produced by the multinational pharmaceutical company AstraZeneca, which, despite receiving substantial public funding for the vaccine’s creation, has not yet confirmed whether the treatment will be released from patent monopoly. A more collective approach was recommended by President Alvarado of Costa Rica who said that “Vaccines, tests, diagnostics, treatments and other key tools in the coronavirus response must be made universally available as global public goods.”
Any decision to enclose patent rights for a vital drug that could safeguard our collective health, while troubling, would be in keeping with conventional wisdom around rights assigned to intangible assets. Intellectual property monopolies have become a hallmark of contemporary capitalism, from the sewing machine to algorithms, with a specific architecture of laws and regulations designed to protect those rights. And, while said architecture has safeguarded important rights for many, it has at times acted as a way to fence-in access to patents that serve the public good, which are instead appropriated for private gain, as demonstrated by the lack of appetite by pharmaceutical giants for patent pooling the COVID-19 vaccine.
The broader mantra driving this approach is rooted in trickle-down values, whereby large corporations are handed lucrative tax breaks and public funds to incentivise innovation, which in turn create profits – the benefits of which are thought to be channelled to serve the public good through, for example, job creation. What this does not take into account, however, are factors such as unwarranted CEO pay and excessive shareholder pay outs, engrained in the profit management psyche of many large firms. Nor does it adequately tackle what firms are best placed to maximise innovation or whether tax reliefs and credits can be used to promote research and development (R&D) that would have occurred regardless.
The Patent Box scheme, for example, is “designed to encourage companies to keep and commercialise intellectual property in the UK” by allowing them to apply a lower rate of Corporation Tax to profits earned from its patented inventions. But it is important to look at who is set to benefit the most from such a scheme: 96% of the total relief has gone to large companies who are not necessarily the highest innovators, and Institute for Fiscal Studies (IFS) has noted that its primary goal “has not been achieved’. Combined with the UK Government’s R&D tax credit, which IPPR revealed has generated a significant deadweight loss, and a pattern begins to emerge of an approach to intellectual property that fails to maximise innovation.
In place of the current approach, we need a new system, one rooted in an acknowledgement that so long as the public sector takes on considerable risk, it must gain a portion of the benefits of its investments. Doing so requires reimagining the role of the state; shifting it from reduced to ‘fixing’ market failures, to one involved in shaping the direction of innovation and sharing the rewards.
This week, Common Wealth published a new paper by Duncan McCann, a senior researcher at the New Economics Foundation, which proposes a new way to manage intellectual property that recognises the role of the state as a major funder of R&D; changes the ownership regime; maximises innovation; ensures that intellectual property (IP) from publicly funded R&D is licensed with purpose in mind; and ensures that the non-monetary value of IP can be leveraged.
Drawing on successful examples in Finland and Israel, the first way that this can be achieved is through the establishment of a publicly funded and owned venture capital firm which would actively invest in companies in the same way as private venture capital firms, for which it would receive an equity stake. Second, in line with Marianna Mazzucato’s vision, risks and rewards for the public sector can be aligned through imposing a series of specific conditionalities, such as pricing controls for public goods and services or a requirement to manufacture locally, to stimulate productive entrepreneurship.
Central to McCann’s concept is that the public should retain ownership of the IP that results from publicly funded research and development through an ‘IP Commons’, which would be carefully managed to circumvent the complications of either being too exclusionary or too open. Under an IP Commons, intellectual property that is the result of publicly funded research would have to be assigned to the government by its creator and administered by a management body that would tailor various licensing arrangements. While such arrangements are unusual in the public realm, they are regarded as conventional in the private sphere, where the result of research and development becomes the property of the owner. In that sense, the government would merely be replicating existing practice within the private sector, with significant public benefits.
As the development of a COVID-19 vaccine has demonstrated, we need a new system of intellectual property management that provides rules and governance mechanisms to ensure that we all benefit from the IP that we create in common.
Such a finding marks an incredible moment, as societies grapple with the heart-breaking reality of this deadly virus. But the progression of this vital treatment also serves to highlight the fundamentally flawed approach to access to medicines and, specifically, the costly practise of patent enclosure by powerful and profitable pharmaceutical giants, resulting in many being denied life-saving treatments.
The vaccine in question is being produced by the multinational pharmaceutical company AstraZeneca, which, despite receiving substantial public funding for the vaccine’s creation, has not yet confirmed whether the treatment will be released from patent monopoly. A more collective approach was recommended by President Alvarado of Costa Rica who said that “Vaccines, tests, diagnostics, treatments and other key tools in the coronavirus response must be made universally available as global public goods.”
Any decision to enclose patent rights for a vital drug that could safeguard our collective health, while troubling, would be in keeping with conventional wisdom around rights assigned to intangible assets. Intellectual property monopolies have become a hallmark of contemporary capitalism, from the sewing machine to algorithms, with a specific architecture of laws and regulations designed to protect those rights. And, while said architecture has safeguarded important rights for many, it has at times acted as a way to fence-in access to patents that serve the public good, which are instead appropriated for private gain, as demonstrated by the lack of appetite by pharmaceutical giants for patent pooling the COVID-19 vaccine.
The broader mantra driving this approach is rooted in trickle-down values, whereby large corporations are handed lucrative tax breaks and public funds to incentivise innovation, which in turn create profits – the benefits of which are thought to be channelled to serve the public good through, for example, job creation. What this does not take into account, however, are factors such as unwarranted CEO pay and excessive shareholder pay outs, engrained in the profit management psyche of many large firms. Nor does it adequately tackle what firms are best placed to maximise innovation or whether tax reliefs and credits can be used to promote research and development (R&D) that would have occurred regardless.
The Patent Box scheme, for example, is “designed to encourage companies to keep and commercialise intellectual property in the UK” by allowing them to apply a lower rate of Corporation Tax to profits earned from its patented inventions. But it is important to look at who is set to benefit the most from such a scheme: 96% of the total relief has gone to large companies who are not necessarily the highest innovators, and Institute for Fiscal Studies (IFS) has noted that its primary goal “has not been achieved’. Combined with the UK Government’s R&D tax credit, which IPPR revealed has generated a significant deadweight loss, and a pattern begins to emerge of an approach to intellectual property that fails to maximise innovation.
In place of the current approach, we need a new system, one rooted in an acknowledgement that so long as the public sector takes on considerable risk, it must gain a portion of the benefits of its investments. Doing so requires reimagining the role of the state; shifting it from reduced to ‘fixing’ market failures, to one involved in shaping the direction of innovation and sharing the rewards.
This week, Common Wealth published a new paper by Duncan McCann, a senior researcher at the New Economics Foundation, which proposes a new way to manage intellectual property that recognises the role of the state as a major funder of R&D; changes the ownership regime; maximises innovation; ensures that intellectual property (IP) from publicly funded R&D is licensed with purpose in mind; and ensures that the non-monetary value of IP can be leveraged.
Drawing on successful examples in Finland and Israel, the first way that this can be achieved is through the establishment of a publicly funded and owned venture capital firm which would actively invest in companies in the same way as private venture capital firms, for which it would receive an equity stake. Second, in line with Marianna Mazzucato’s vision, risks and rewards for the public sector can be aligned through imposing a series of specific conditionalities, such as pricing controls for public goods and services or a requirement to manufacture locally, to stimulate productive entrepreneurship.
Central to McCann’s concept is that the public should retain ownership of the IP that results from publicly funded research and development through an ‘IP Commons’, which would be carefully managed to circumvent the complications of either being too exclusionary or too open. Under an IP Commons, intellectual property that is the result of publicly funded research would have to be assigned to the government by its creator and administered by a management body that would tailor various licensing arrangements. While such arrangements are unusual in the public realm, they are regarded as conventional in the private sphere, where the result of research and development becomes the property of the owner. In that sense, the government would merely be replicating existing practice within the private sector, with significant public benefits.
As the development of a COVID-19 vaccine has demonstrated, we need a new system of intellectual property management that provides rules and governance mechanisms to ensure that we all benefit from the IP that we create in common.
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