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February 28, 2005

Can Government Take Patents?

According to The American Prospect, maybe. Apparently, the idea of taking property for the public benefit appeals to legislators looking for  a solution to costly prescription drugs. DC Councilman David Catania introduced a compulsory license bill.

It authorizes Washington, D.C.’s mayor to declare a health emergency and, under eminent domain authority, issue a compulsory license to a generic firm to produce select patented drugs.

Under eminent domain requirements, the patented drug company would be given “just compensation” for the patent. The councilman argues that if drug companies were smart, they would “start talking about price reductions now rather than leave themselves open to a long, drawn-out due process review and hearings to determine just compensation.” Such review and hearings, he warns, would expose “just how pervasive the price gouging and profiteering has been.”

I found this story through slashdot, where you can discuss the issue.

I'm not sure that it's a good idea to start taking patent rights under eminent domain. The public policy behind the granting of a patent is to benefit the public by creating incentive to invent. If that incentive is compromised, then the public may ultimately lose.



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Posted by Melody Wirz at 09:40 AM.
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Comments

Doesn't eminent domain require the government to pay some (debatable and appealable) measure of fair value for property taken? If fair compensation is paid, that may compromise the incentive, but not eliminate it. Somehow, salary caps in professional sports come to mind.

Under TRIPS pt. II, §5, Art 31, is there not a provision allowing governments to legislate for what are sometimes called "compulsory licenses" if a reasonable effort to negotiate a license on "reasonable terms and conditions" fails? While this authority may not extend all the way to the municipal government of the District of Columbia, the concept seems comparable.

Even TRIPS contemplates adequate compensation to the patent holder based on the economic value of the license.

See, e.g. Peggy B. Sherman and Ellwood F. Oakley, "Pandemics and Panaceas: The World Trade Organization's Efforts to Balance Pharmaceutical Patents and Access to AIDS Drugs," 41 Am.Bus.Law.J. 353, 369 (2004)

Posted by: Doug Simpson [TypeKey Profile Page] at February 28, 2005 09:34 PM