The exclusive IP rights conferred by patents could hinder or delay the discovery of life-saving remedies against the virus.

What might happen if this should be the case?

Let’s consider for a moment how Italian national rules are set to balance the fundaments rights at stake (on the one hand, the exclusive rights of IP owners and, on the other hand, the public health and security of citizens), as well as foster the research and technical process for the treatment of the Covid-19 disease.

Article 141, para 1 of the Italian Code of Intellectual Property (“IPC”) provides that the Government may start a forced expropriation in relation to any IP right (excluding trademark rights and, by analogy, de facto trademarks, domain name, business name, sign-board) “in the interest of the military defense of the Country or for other reasons of public utility”.

This would apply to IP rights already granted, as well as those rights which are still under the Office’s patent or registration examination process. In this case, the Government would acquire the patent or registration right and, therefore, the procedure for granting the respective industrial title will continue (or not!) at its complete discretion.

Moreover, the expropriation may concern the industrial right in its entirety or be limited to the use of the invention in the public interest, for a limited period of time. These rules will be set forth by the expropriation decree that will be issued pursuant to article 194 IPC.

In case the Government should decide to exploit the patent in the interest of the Country, this will bring to a compulsory license in its favor. The patent owner will still have the opportunity to exploit his own right to satisfy any potential requests made by private citizens.

This principle has been very rarely brought to the attention of Italian Courts and the few decisions issued on the point tend to state that, given the peculiar nature of pharmaceutical patents, the respective industrial right of the owner must “surrender” before the “function of social utility of the drug to which the patent is linked to“, so that the interference of the Government is legitimate also in relation to the manufacture and distribution of pharmaceutical products in view of the protection of supreme national interests such as, in the present case, public health pursuant to article 32 of the Italian Constitution (TAR Lazio n. 7856/2003; TAR Lazio n. 7858/2003; Court of Milan 04/11/2010).

Nevertheless, in the Italian IP system some relevant conditions are to be mentioned as a safeguard for the industrial right owner pursuant to article 141 IPC:

1. Reasons of public utility

The expropriation is allowed only for public interest reasons (as well as military defense, which is out of the scope of the present article), including serious and urgent public needs also of national production. It is, therefore, evident that this may arise in situations of extraordinary pandemic emergencies, such as the one we are living in these days. In that regard, some countries such as Canada, Chile, Ecuador, Israel and Germany have already taken measures by issuing compulsory licensees on patented drugs, vaccines and medical tools for the Covid-19 treatment.

2. Legal instruments needed to acquire the patent

The enforcement of the expropriation, as well as its duration, must be regulated by a Presidential Decree, which is enacted at the end of a peculiar and articulated legislative procedure.

This measure is issued in the form of a Decree of the President of the Italian Republic, on the proposal of the Minister in charge, in consultation with the Ministries of Economic Development, Economy and Finance. The decree is then published in the Official Bulletin, unless this may cause prejudice and it is in any case recorded in the Register of industrial property rights of the Italian PTO.

Once the decree has been notified to all the interested parties, the expropriated industrial right is therefore acquired by the Government, which will be able to exploit it within the preset limits, but will also be required to pay the rights for its maintenance in life.

3. Remuneration

The Presidential Decree must determine a fair remuneration payable to the owner for that loss and its amount must comply with the logic of market value.

However, it may happen that the owner of the expropriated industrial disagrees with the Presidential Decree about the value of the remuneration and, in the absence of agreement, its amount must be determined according to fair appreciation by a panel of arbitrators.

4. Other jurisdictions

The same controversial issues are addressed also in other jurisdictions.

As regards the UK system, the Patent Act 1977, sections 55-59 allow the so called “Crown Use” to act in the best interests of the public, which consists in using the patented pharmaceutical products “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 whatever purpose”, without the consent of the owner but upon payment of a compensation for the loss of profit. For instance, these provisions have been enacted in the past mainly in connection with pharmaceutical products (see Pfizer v. Ministry of Health [1965] AC 512, as regards the use of a patented drug in NHS hospitals was intended for the services of the Crown) and medical tools (see Dory v Sheffield HA [1991] FSR 221, as regards the supply of machines for the treatment of kidney stones).

In the US Patent system the situation is more uncertain: some courts consider patents as intangible property rights protected under the U.S. Constitution Fifth Amendment Takings Clause, with the consequence that the Government must pay reasonable compensation for the use and/or manufacture of patented inventions for public interest (see James v. Campbell¸ 104 U.S. 356, 357-58 (1882); Horne v. Department of Agriculture, 135 S. Ct. 2419, 2427 (2015); Oil States Energy Services, llc, Petitioner v. Greene’s Energy Group, llc, et al. 584 U.S. (2018)); others courts, instead, established that “patents are public franchises, not private property”, which, as such, are not entitled to the Taking Clause compensation when it is taken for public use by the Government (see Christy, Inc. v. USA (U.S. Court of Federal Claims) still under appeal to the Federal Circuit).[1]

As far as Germany is concerned, section 13 of the German Patent Act allows the Federal Government to issue exploitation orders in case a patented invention is to be used in the interest of the public welfare (as well as in the interest of the security of the Federal Republic of Germany), upon equitable remuneration to the expropriated owner of the patent. However, in some cases German courts have issued compulsory licenses where the needs of the public were of such high importance that the monopoly granted to the patentee had to be restricted, as happened for pharmaceutical and medical products used for the treatment of HIV infections and other serious infections or diseases (German Federal Patent Court, Munich (Bundespatentgericht) 3 LiQ 1/16 (05.09.2016); German Federal Supreme Court, Karlsruhe (Bundesgerichtshof) X ZR 26/92 ‘Polyferon’ (05.12.1995)).[2]

FEDERICO ZANARDI LANDI                           MARTINA PORTRANDOLFO