Sergey Puzyrevskiy: patents should not be used to restrict competition

Excessive protection of intellectual rights is not always an incentive for developing innovations and attracting investments

On 18 May 2017, St Petersburg Legal Forum included a session on “Promoting Competition and Innovation Through Access to Non-voluntary Licensing: The Pharmaceutical Industry Experience”.

The discussion focused on balanceв of intellectual right protection, innovation developing competition and innovation in the pharmaceutical industry based on the experience of the European Union and the USA. The session moderator was Head of FAS Department for Control over Social Sphere and Trade, Timophey Nizhegorodtsev.

International experts on antimonopoly regulation of intellectual property rights and representatives of pharmaceutical companies exchanged opinions whether excessive protection of intellectual rights is a pledge for attracting investments and a necessary condition for innovation. They raised an issue on adequacy of payments to patent holders is the government decides to grant forced licenses, judicial cases and the state of competition on such markets.

“Today there are vivid discussions in Russia about the degree of intellectual rights protection and we are very much interested in the experience of western countries.  In particular, to what extent forced licensing is applicable and widespread in Europe and the USA, what restrictions are in this field in view of the forced licensing object, the market of its circulation, the validity period for government permissions to use intellectual rights by patent holders”, said Timophey Nizhegorodtsev, opening the event.

Professor of Law, Jerome Reichman, Dukes Universitydescribed five types of mandatory forced licenses issued due to various reasons, under different conditions and grounds.  He emphasized that forced licensing is a possibility to persuade manufacturers to sell drugs at reasonable prices rather than a method of intended adverse pressure upon pharmaceutical companies. “Forced licensing is the last argument. It should be used as a threat and should be applied when strictly necessary”, stated Professor Jerome Reichman.

According to Director of the Institute of Law and Development, HSE-Skolkovo, Alexei Ivanov, today technological changes in the economy put new challenges to antimonopoly regulation, thus, the Institute and FAS combine efforts to develop tools to promptly react to such challenges. “In the absence of antimonopoly control over innovative markets, entry of new companies to these markets will be suppressed through a bulk of intellectual rights applied only in anticompetitive, parasitic goals”, emphasized the expert. “Article 10 of the Civil Code does not offer fully-fledged protection from such patent holders, and the Law “On Protection of Competition” does not contain the relevant provisions, which is not typical for any successful economy”. He pointed out that forced licensing is an antimonopoly remedy, actively employed in the world to stimulate innovations and other public needs and counter anticompetitive practices.

In view of Dr. Matthias Lamping, a senior researcher on intellectual rights and competition at Max Planck Institute, the patent system should function differently depending on the specifics a particular sector of the economy and harmonize with the policy of in other spheres of life. “Forced licensing can include different types of licensing. It is necessary to understand that patent is not an incentive for innovations. The patent system has no relevance to individual rights, its aim is to provide sufficient knowledge generation in the society”, pointed out Dr. Matthias Lamping.

Professor of Economics William Comanor (University of California) highlighted economic specifics of the pharmaceutical industry in the USA, analyzing the market of original medicinal drugs and generics.

Head of Austria Competition Authority, Theodor Tanner; a Professor of Stockholm University, Bjorn Lindquist; Head of Federal Service on Intellectual Property, and representatives of pharmaceutical manufacturers also took part in the discussion.

Deputy Head of FAS Sergey Puzyrevskiy summed up the session results.
He emphasized: “We have had a serious, significant discussion and reached rather sudden conclusions. Experts point out that patent protection is not always an incentive for innovations and investments; moreover, it can restrict competition. Such conclusions show that we it’s time for us to raise an issue on correct employment of the antimonopoly law to intellectual property objects. These issues are solved in the European Union, the USA so lack of clear answers to them in Russian law is a restricting factor of competition development, particularly, in the pharmaceutical industry”.

FAS has drafted a Federal Law on making amendments to the Civil Code and the Law “On Protection of Competition”, which should determine the limits of antimonopoly intervention to the intellectual property objects. He summed up: “Regarding forced licensing, the Government will have the right to make decisions on granting forced licenses for intellectual property objects for a particular period and with adequate compensation in case of life and health threat to the citizens of the country.  Upon adopting the draft law, our approaches will conform to the forced licensing approaches in Europe and the USA.  No doubt, in view of the new conclusions and analysis of foreign laws we will be able to reach mutual understanding on those issues”. Currently the draft Law is being considered by federal executive bodies.