Monday 1 December 2008

Patent Insurance: a financial prescription for neglected diseases?

IP Finance is hosting a guest posting from Itaru Nitta (Chair, Green Intellectual Property Project (, Geneva, Switzerland). It is titled "Patent Insurance: a financial prescription for neglected diseases?" and it runs as follows:
"On November 19th, the World Health Organization appointed the expert working group as a response to the Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property (IP) adopted at the World Health Assembly this May. One of the group's main tasks is to find new funding mechanisms fostering needed medical research on neglected diseases and ensuring unimpeded access to necessary meditations irrespective of commercial profitability for developing nations.
The working group would likely find an answer with the Patent Insurance scheme being proposed by Geneva-based IP consulting group Green IP Project to impose an extra official fee on patent applicants and holders as a form of insurance premium, and to establish a trust fund that would finance the compensation of technology transfer costs, particularly royalty assumption, and other subsidies for purchasing patented medicines in developing counties, as well as a wide variety of funding proposed for need-based research for public benefit rather than profit motive, including medical grants, prizes, treaties, public-private partnerships, advance market commitments, market exclusivities (orphan drug schemes) and tax credits.

These financial assistances would convince society of the wisdom of patent, resulting in upholding the efficiency of the patent regime against recently growing the global criticism over the patent protection of essential medicines and resultantly diminishing societal trust over patent. In other words, the extra fee would serve as a "premium" for defending patent rights against the risk of compulsory license and other safeguard flexibilities which the worldwide anti-patent protest has increasingly justified, and resultant erosion of the entire patent system. Consequently, the dual benefit of the premium not only for developing nations in the financial aids but also for developed nations in ensuring patent rights would readily build consensus by developed nation patentees on their burden of paying the patent premium.

Such premium would be an additional weight for patentees in the traditional balance of public interest (innovation disclosure) and private right (patent monopoly as a reward for the disclosure) in the patent legitimacy. In the sense of economics, the patent premium would serve as a kind of "green taxation" to facilitate market incorporating its failure that patent protections generate in society, while maintaining the major function of patent to enhance knowledge pie in society through innovation disclosure, suppression of corporate secrecy and capital concentration for further innovations.

Since the Patent Insurance scheme would be embedded in the existing patent system, the scheme would possess a substantive and sustainable financial scale (possible annual revenue: up to several tens of billions in US dollars) due to enormous amount of both quantity (e.g., filing number) and quality (e.g., subject matter) in the present patent system worldwide.

The scheme would also equip to prevent the burden of paying the premium from inflating the price of patented medicines by two measures: the translation waiver and reduced price of official fees.

Under the translation waiver, patent applicants would no longer need to file an application translation with a local patent office once they paid the patent insurance premium. This waiver of translation would compensate or even outweigh the financial load of the premium because application translation accounts for a significant proportion in the costs of obtaining a foreign patent (roughly speaking, the total cost for a single foreign application is US$10,000 and its translation costs usually US$3,000 or more). The translation waiver would be supported by considerable improvement in computer translation, allowing a patent office to examine an application without a human-conducted translation or even by utilizing such translation of limited portions (e.g., only claims and relevant descriptions in a specification).

In addition to computer translation, another technical progress in examination of patent applications would offer a discounted official fee for those who have already paid the premium. This lowering would be brought about by streamlining examination by means of emerging technologies for identifying and measuring innovations. These tools would include information & communication technologies, highly-evolved patent-mappings and other intelligent methodologies.

Besides the scheme's original functionality of insuring patent, the financial advantage of the translation waiver and discounted official fees would further facilitate an agreement by patentees and industries in developed countries on paying the patent insurance premium.

The Patent Insurance scheme would no longer regard the patent as a mere innovation protector, but rather as more like a pro-active financial driver of funding for the largest overall benefit in society".
If you'd like further information about Green Intellectual Property or want to make any comments on this piece, you can email Itaru here.

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