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Publication Date

2007

Abstract

Recent patent compulsory licenses issued by Thailand and Brazil have focused attention on this property rights safety valve as a means for balancing access and innovation in essential medicines. While derided in some quarters,many view these measures as a legitimate exercise of the flexibilities that exist in international intellectual property agreements, recently enhanced as a result of the WTO's Doha round of trade negotiations. But the increasing willingness to utilize patent compulsory licenses faces a troubled future: the international framework is dangerously ambiguous and significantly misaligned. Chief among the concerns is the level of compensation owed to a patent owner for the loss of exclusivity. There is an utter lack of standards in international law, and countries generally resort to compensation conventions that are beset by myths regarding the available options and shortsightedness as to the future impact. Largely ignored in the literature, this lack of a clear floor or ceiling to compulsory license compensation can make patent property rights less predictable, encourage gamesmanship by developing or developed countries wishing to cut expenditures, and, most perversely, even stifle access. This Article attempts to clarify the issue by focusing on the economic basis of compulsory licenses and identifying the underlying principles in existing compensation models. It suggests an innovative licensing framework that separates countries into three economic development tiers with different royalty mechanisms. Such a nuanced system, the Article argues, will lead to more predictability and effective institutional mechanisms, ensuring continued innovation and greater access to essential medicines.

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