Compulsory Licenses 'A Two-Edged Sword'

Abstract

Issuing a compulsory license is not like flipping a switch that opens the floodgates for affordable medicines. Even the most well-intentioned compulsory license can benefit only a small fraction of its intended recipients if not managed properly. Unfortunately, developing nation governments are regularly issuing compulsory licenses without due consideration of secondary effects that have the potential to negate any benefits from increased access. Compulsory licenses have cost nations hundreds of millions in foreign direct investment as patent-owning firms seek a more business friendly legal climate. Licenses have triggered costly and needless litigation from skittish patent owners eager to challenge the license’s compliance with domestic and international law. Licenses have also attracted manufacturers who use the license to prey on poor consumers instead of alleviate the consumption problem through low-cost access. Finally, licenses invite scrutiny by wealthy governments ready to defend their multinationals through trade sanctions that cripple the economy of the licensing nation. The challenge for poor governments is not whether to issue a compulsory license at all. Rather, the challenge is how poor governments can issue compulsory licenses that both maximize drug access and avoid unwanted side-effects. Poor governments have been too often dismissed as passive recipients of aid, little able to influence conditions in their own nation. Developing country officials have significant untapped potential to influence local conditions and set policies that will increase access to pharmaceuticals under a compulsory licensing regime. Compulsory license cannot be regarded as a panacea, but rather as an essential insurance policy to prevent abuses of the Intellectual Property system.