Humanitarian Use Licenses

Humanitarian Use Licenses are provisions in a license whereby inventors and technology suppliers protect in advance the possibility of sharing their technology with people in need. Thus, Humanitarian Use Licenses set the conditions for the provision of access to innovations for people in need at a royalty free basis or at lower costs. Humanitarian Use Licenses assure that products of Research & Development stay publicly available and that at the same time the incentive function of exclusive Intellectual Property Rights are maintained.

The Intellectual Property Rights System

Humanitarian Use Licenses represent a tool to distribute the outcomes of Research & Development more equally. They represent exemptions in the execution of the exclusive claims of Intellectual Property rights that have to be seen in the context of current intellectual property practices and their worldwide application. Intellectual Property (IP) is an umbrella term for various legal entitlements which attach to certain types of information, ideas, or other intangibles in their expressed form. The term intellectual property reflects the idea that this subject matter is the product of the mind or the intellect, and that IP rights may be protected at law in the same way as any other form of property. Understanding the political reality of IP includes a realization that IP is originally a Western notion currently being introduced into other parts of the world. This is necessary to understand why IP law has severe difficulty in taking hold in non-western societies in general and in developing countries in particular. More understanding is required of the differences between economic sectors and the respective roles and functions of public versus private institutions in society. (Egelyng)

Functions and Dysfunctions of Intellectual Property Rights

There are several functions related to IPR that make them work as catalyst at the market. But there are also fundamental differences between the economic and social conditions of developed countries and developing countries. Hence, conventional licensing practices have caused distortions that make humanitarian use licenses a tool worth to consider.

Incentive function

The holder of a legal Intellectual Property Right entitlement is generally entitled to exercise exclusive rights to the subject matter of the IP. This enables his owner to have a comparative advantage to others for a limited time span. Thus, innovative activity is rewarded, which stimulates R&D and improves the life of all.

But many developing countries are characterized by a weak or Research & Development sector. Of the 400,000 inventions applied annually, developing countries take part in 1 per cent whereas the USA, the USSR, the Federal Republic of Germany, and Japan participate in 73 per cent. (Vestry Besarovic). This makes the industrial sector largely dependent on imitation. Universally imposed minimum standards of patent protection, like it is the case with the Agreement on Trade-Related Aspects of Intellectual Property Rights, are not likely to contribute to economic growth unless a particular level of development has been achieved (Thompson and Rushing). When developing countries have to purchase expensive technology because of a protected regime that is adopted, it could lead to the break up of industries and thus reduce economic growth.

Transaction function

The existence of IPR protection over i.e. the inputs to a collaborative research facilitates inter-firm Research & Development collaboration. Transaction costs are minimized as it is clear which intellectual property belongs to whom. So it is commonly assumed that patents stimulate the emergence of markets.

But if transaction costs are a hindering factor depends also whether there is a sufficient resource endowment of the industry. This factor decides on the relative price of a patent and its relative utility. In economies that have to rely on imitation clear IP laws are unlikely to simulate innovation, they will rather discourage it. IP protection gets important on higher stages of development when it serves to stimulate i.e. FDI. Until this stage is reached, the relative benefits for facilitating transactions will not weigh out the relative costs of hindered technology application.

Disclosure function

The disclosure of innovations is a requirement when a patent is filed. By disclosure of innovations skilled persons will be able to use the innovation. New technologies are applied and further innovations can be built on existing ones.

But rates of secondary and university education are much lower in developing countries than they are in developed countries. This lowers, together with the lack of capital flows into Research & Development, the potential for adoption and new development of innovations based on existing ones. Thus, disclosing technology for facilitating implementation and innovation based on disclosed information becomes useless, as the preconditions are not given for such processes.

Inequalities in the global Inetellectual Property Rights System

The effects of the globally imbalanced power relations are best illustrated by having a look at of the IPR strongly concerned sectors, medicine and agriculture. These sectors are at the same time also crucial for development as they serve the basic needs of people.

Here, intellectual property practices can be harmful, as they cover consumer products. Patent protection for drugs for example keeps the price of these drugs high and hinders competitors to introduce cheaper generic versions

In Agriculture the patenting of genes or certain properties of crops can make the use to these crops costly and burdensome. Access to varieties that have been under long use by farmers can be restricted and as a cause markets can be destroyed. An illustrative example for this is the case of the Enola bean, where a field bean variety showing a certain colour was patented. Subsequently the liconsor required all importers of Mexican beans to pay royalties, which would have caused a significant drop in export sales of beans from Mexico

But also in intermediate stages, IP protection might hinder development, as it expands not only over final, but also over intermediate products, processes and tools. Thus, intellectual property protections covering biotechnology can decrease the development of and access to new technologies in developing countries, thus preventing new, adapted varieties or drugs to be developed.

Moreover, drugs for certain diseases or varieties adapted to conditions in tropical countries have been developed only to a limited extend yet, as the purchasing power in these countries is low and thus there are no lucrative markets Although only 10% of the global disease load are related to industrialised countries, 90 percent of global drug R&D investment goes toward the drug development of industrialized countries. R&D projects that address diseases of developing countries such as malaria and tuberculosis receive comparatively little funding.

The Role of Humanitarian Use Licenses

Of course, HUL and improved management of IPR on its own do not solve the development problems of developing countries. But considering HUL when making contracts can help to decrease the shown inequalities of the world market. Especially for the example of the previous paragraph, the agricultural and medical sector, it can be illustrated what impact a humanitarian use exemption can have.

timulating Research & Development

Technologies can be provided that stimulate the development of needed and to local conditions adapted products. Companies and research institutes in the specific countries are able to produce and develop at lower costs and know the local needs and problems best. This stimulates also future Research & Development as it creates learning by doing effects, thereby generating additional resources, ideas, and needs that fuel more innovation and technology creation. Technology can benefit the poor farmer or the sick people that are in need of drugs or food as well as the economy as a whole by stimulating Research & Development.

Providing consumer products

Humanitarian Use Licenses have the potential to enhance the supply of important consumer products. When cheap or cost free licenses are granted to companies in developing countries, it would be possible for them to produce copies of drugs or seeds to provide the population with. Apart from missing royalty payments companies in developing countries will possibly be able to produce and distribute at a much lower price than companies in wealthier countries.

How it works

Defining the population that should benefit and the institutions that can serve the needs of this population is required in the humanitarian use licensing scheme. Depending on the different technologies that should be assigned via the Humanitarian Use License, there are different approaches of how to formulate a Humanitarian Use License. Below there are some examples of strategies of how a Humanitarian Use License can be assigned.

Assigning non-exclusive licenses

Assigning a non-exclusive license means to retain the freedom to assign licenses also to other parties. The terms under which additional licensing is provided can be fixed beforehand, thus securing the situation for the licensee. Defining humanitarian use could mean that the licensor is only permitted to assign additional licenses to countries in certain regions or that are i.e. classified as least developed countries.

Transferring technology to Public Private Partnerships

Public Private Partnerships are projects that private sector companies and the government jointly fund and operate. Governmental involvement can be seen as giving an incentive for private companies to engage in R&D activities that they otherwise would not have carried out. Transferring technology to Public Private Partnerships for product development for neglected markets or neglected diseases is a way of facilitating the work of Public Private Partnerships, enabling them the development of adapted products.

Transferring technology to companies in DC

For the development of adapted technologies a direct partnership between companies, universities or research institutions of developed and developing countries can be established. Partners in developing countries will have a greater interest to meet the needs of these countries.

Conditions in funding agreements

Governments or foundations that fund research can require that the outcomes will be free for humanitarian licensing. The establishment of those clauses secures that later negotiations will be held with clear expectations.

Performing milestones

Measuring the progress and the impact of a project can be done by the inclusion of performance milestones. An example of a humanitarian licensing mile stone is i.e. the condition that on or before the date of the first phase of a clinical trial for a new drug, the licensee will have identified a generic manufacturer in a middle-income country to produce the licensed technology at a reasonable price for developing countries. Subsequently, if this milestone is not met, other provisions and reservations in the agreement would be triggered, for example loss of exclusivity, sublicensing, exercise of march-in rights, and even termination of the agreement. (Brewster, Chapman, Hansen)

Ensuring accessibility in pricing

Access to a product can be assured when the licensor requires that products are sold at the markets in developing countries to a price, people can afford there. an appropriate price may be set by having i.e. the production costs plus a small profit of about 5-10%.

Granting research exemptions

Stimulating the research of products that are adapted to the conditions in developing countries can be achieved when clauses that exclude particular categories of research from infringement are integrated into licensing agreements.

ecuring reach through rights

By including reach through clauses, new technologies, based on the licensed one, will be treated under the same licensing conditions that cover the original license. Thus, intermediate technologies, genes or processes can be maintained available for licensing for humanitarian licensing.

Including non-suit clauses

A “non suit” agreement is an agreement that an IP holder will not assert these IP rights against one or more parties to the agreement. (Kaplan) The advantage for institutions or companies granting innovations is that they wont have to fear any liability by using these clauses. For example, companies may hesitate to grant i.e. genetic material to research institutions, as they might fear any claims that can be made based on international agreements like the Cartagena protocol, that force companies into the responsibility to care for the material they distribute. A way out of this situation is a non-assert clause that can be introduced in transfer agreements, stating that

Benefits for the Supplier

Actually HUL do interfere with the exclusive claims that are connected with Intellectual Property Rights what might raise the fear of companies that there could be a lack of revenues happen when those licenses are included. This however has not to be necessarily the case, as mostly non-commercial markets are served with HUL. That means that people are provided with royalty free goods, that otherwise would not have the money to purchase these goods, so that only little of revenues is likely to occur. In addition two important benefits for technology supplier can occur.

Positive publicity and incentives

Donating technology and supporting Research & Development for developing countries will cause positive publicity for companies that do so, especially in the biotechnology and medical sectors. This can be reinforced if also governments take a role in this. Promoting positive publicity by giving prices or tax incentives are possible ways to reward companies that are engaged in underserved sectors.

Creating markets

Many developing countries have a growing potential private market for technologies. The technology supplier may plan to develop these growing markets as part of a long-term market strategy, implying that the supplier expects these currently unprofitable markets to become profitable in the future. Thus, the supplier can create a loyal customer base in the future with a generous donation today (IP strategies 2001)

Issues in Developing Humanitarian Use Licenses

hould an HUE be voluntary?

HUL could be compulsorily assigned by the government or subject to voluntary implementation by the patent holder. However, developing standards in humanitarian licensing that encourages also private companies to technology transfers would rather stimulate the voluntarily engagement of the private sector in Research & Development in development. Thus, resources would be directed into more productive channels than compulsory licensing could do. Building trust of partners can be achieved by careful drafted clauses that an Intellectual Property Rights holder could choose to include in licensing agreements.

Leakage

Anytime a targeting mechanism fails to exclude unintended beneficiaries, leakage occurs and the cost of the donation to the supplier can increase. With regard to lost markets, the cost of such a failure depends on how many farmers included in the target would have purchased the technology from the market had they not been granted preferential access via HUTT (IP strategy 2001) Leakage of the technology to unintended beneficiaries is possible, even probable as the experience of food transfers has shown how difficult it can be to reach the intended beneficiaries. Precisely defining the intended beneficiaries and establishing the right mechanism to reach them to reduce leakage to a minimum is essential to successful HUL as thereby more goods reach people in need an as the loss for the supplier will be minimal which ensures a stable partnership. A trade-off between the effort to administer the targeting scheme and the size of leakage is probable – the lower the risk of leakage should be, the higher will be the cost of implementation of these targeting schemes.

Are there already HUL available?

So far not many examples of humanitarian use licenses are available. There is a general formulated template of a HUL available at the [http://www.pipra.org/ PIPRA] website and in articles such as Kaplan (2006). Some language can be found that could serve as template for more tailored clauses. The [http://www.cas-ip.org/ Central Advisory Service on Intellectual Property Rights (CAS-IP)] of the [http://www.cgiar.org/Consultive Group of International Agricultural Research] is currently preparing a website that will offer standard templates of HUL for various market segmentation strategies. The formulation of HUL templates is an important step into the direction of a broader application of HUL. Creating commonly recognized language for HUL would make it more easy for IP holders to grant their property to people in need as time consuming negotiations and formulations of contractual language and market segmentation approaches would cease to apply.

Fields of Application

Whether for intermediate or for final products – Humanitarian use licenses should be considered in every stage of development as IPR can restrict the access to materials, processes for product development or final products of Research & Development. Patents can be granted with respect to whole varieties, single genes or procedures that permit the isolation of genes. Humanitarian Use Licenses therefore do not only concern companies that bring products to the market and could via such licenses directly deliver people in need. It has to be considered also by Universities, National and International Agricultural Research Centres and Public Private Partnerships whose work represents the basis for further upstream research.

Literature

Intellectual Property Rights in the global economy. Maskus, K., Institute for International Economics, Washington DC.

Facilitating Humanitarian Access to Pharmaceutical and Agricultural Innovation. In: Innovation Strategy Today, Vol. 1, 3 – 2005, Brewster, Amanda L., Chapman, Audrey R., Hansen Stephen A.Web: http://www.biodevelopments.org/innovation/ist3.pdf

Technology Transfer for Humanitarian Use: Economic issues and market segmentation approaches. In: Innovation Strategy Today, 5 – 2002 Lybbert, Travis J.Web: http://www.biodevelopments.org/ip/ipst5.pdf

Exploring a Humanitarian Use Exemption to Intellectual Property Protections: Report from Meeting 1 of the SIPPI Humanitarian Licensing Working Group, July 13-14, 2004Web: http://sippi.aaas.org/meetings/#hue

Science and Intellectual Property in the Public Interest, Exploring a Humanitarian Use Exemption to Intellectual Property Protections. Kaplan, W.Web: http://www.who.int/intellectualproperty/studies/W.Kaplan2.pdf

Using IP Agreements to promote the objectives of Public Private Partnerships in developing affordable products for developing countries. Kaplan, Whttp://www.who.int/intellectualproperty/studies/ip_agreements/en/index.html

Legal aspects of the transfer of technology in modern society. Vestry Besarovic, in: Science and technology in the transformation of the world. The United Nations Universityhttp://www.unu.edu/unupress/unupbooks/uu01se/uu01se00.htm#Contents

Evolution of Capacity for Institutionalized Management of Intellectual Property at International Agricultural Research Centers: A Strategic Case Study. Egelyng, H.http://www.agbioforum.org/v8n1/v8n1a02-egelyng.htm


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