D r u g Patents a n d Compulsory Licensing T H E O D O R E G. KLUML>P, President, Wiiitlirop Chemical Co., Inc., 170 Varick St., \ e w York, N . Y .
T o c a l l o u r p a t e n t s y s t e m m o n o p o l i s t i c i s t o f a i l to s e e t h a t pulsory l i c e n s i n g m u s t retard industrial progress JL H E R E are m o m e n t s in history when political chaos, economic instability, or social discontent stimulates such dissatisfaction with existing p a t t e r n s of living as to bring them u n d e r close re-examination. Indeed, in such circumstances changes may b e made i n the s t a t u s q u o for t h e sake of change rather t h a n for human betterment. T h i s is one of those m o m e n t s . And t h a t moment, beginning with t h e Black Friday stock m a r k e t crash in 1929 and continuing t h r o u g h t h e political upheavals t h r o u g h o u t the world which were climaxed by World War IT, is now half a generation old. I t is a m o m e n t i n which few American institutions a r e under greater scrutiny t h a n t h e American p a t e n t s y s t e m . It is argued t h a t o u r p a t e n t laws have failed to keep pace with t h e ever-increasing complexities of m o d e r n civilization. It is charged t h a t t h e p a t e n t confers a monopoly o n its holder. F u r t h e r , some corporations are accused of exploiting t h e patent laws t o stake o u t for themselves monopolistic a n d other unfair competitive advantages w h i c h a r e at once prejudicial to the public interest and c o n t r a r y t o the i n t e n t of the p a t e n t a n d a n t i t r u s t laws. P r o p o n e n t s of these views assert t h a t the time h a s come to modify t h e p a t e n t laws in order t h a t the ''evils" which t h e y see m a y be eliminated. I n their view, a major revision would provide for general compulsory licensing of patents. Others are against t h e broad implications of these proposals but feel t h a t compulsory licensing of patents in fields essential to t h e public health and welfare is justifiable. Before commenting on t h e merits of the above arguments i t is p e r h a p s well t o dispose of certain erroneous notions that m a n y people entertain a b o u t p a t e n t s . A p a t e n t does n o t give the patentee t h e right to work the invention or t o sell it. He could do t h a t w i t h o u t a n y patent. All the p a t e n t does i s to provide a n incentive to invent, b y giving t h e p a t e n t e e t h e right to exclude others from practicing t h e invention for 17 years. T h e condition is that the invention m u s t be new a n d useful, and the patentee m u s t describe i t so t h a t anyone can practice i t when t h e limited time expires. A p a t e n t merely gives t h e inventor a h e a d s t a r t in a competitive race with respect t o h i s novel contribution to knowledge, s o t h a t he m a y profit from w h a t he has given to t h e world without exposing himself for t h a t t i m e t o t h e competitive hazards which might otherwise Paper presented before the AMERICAN CHEMICAL SOCIETY, Chicago, 111., Sept. 9, 1946.
3174
com-
overwhelm h i m a n d deprive him of t h e fruits of his invention. This does not h u r t a n y b o d y because t h e inventor h a s brought some-thing new into t h e world, and if it had n o t been for him no one would h a v e h a d it at all. We say t h a t Morse invented t h e teleg r a p h . T h e r e was no telegraph before. Fxlison invented t h e electric l a m p . There was none before. Hell invented t h e telep h o n e . T h e e wa,s no telephone before Bell. So to give these m e n patents did n o t t a k e a w a y from other people a n y t h i n g a t all. N o b o d y h a d these things before these men t h o u g h t t h e m u p . I t is no answer t o say t h a t these inventors deserve n o special reward because if t h e y h a d n ' t m a d e their inventions someone else would have come along a n d dreamed u p t h e s a m e thing. W e might as well say t h a t t h e United S t a t e s does n o t deserve " L i t t l e America'' because if Byrd h a d n ' t discovered it t h e explorer of some other nation would have. Or, it could be argued equally well t h a t t h e gold prospector w h o strikes it rich d o e s n ' t deserve his riches b e cause someone else would sooner or later h a v e h i t t h e s a m e vein of ore. As long as h u m a n n a t u r e is w h a t it is, t h e possibility of a, great r e w a r d will forever remain a powerful stimulus to progress particularly in t h e fields of exploration, invention, literature, a r t , a n d creative thinking. I needn't point out to a group of chemists that patents in themselves are n o t always valuable; unfortunately, m a n y are n o t worth a d i m e . However, t h e exclusive advantage given t h e first inventor serves in a very real sense t o promote t h e progress of science a n d useful arts by turning other inventors t o w a r d something better or different. I t is t h e finest device yet invented for wiping t h e slate clean of repetitious a n d unnecessary research. If t h e Congress would give t h e P a t e n t Office more help so t h a t p a t e n t s could issue more p r o m p t l y it would be even better. Changes
Proposed
I a m in s y m p a t h y with some of t h e proposed changes in our patent laws—for instance, proposals t o reduce t h e time lag between a p a t e n t application a n d its issuance, compulsory licensing of unused patents, and steps to raise t h e s t a n d a r d of patentability. B u t suggestions a r e again being seriously entertained in Washington to a p p l y special limitations t o p a t e n t s in fields related to public health, a n d t h a t includes primarily drugs. T h e s e suggestions come with a new coat of paint, but t h e y are t h e s a m e old proposals t h a t have been re|>eatedly a d v a n c e d and rejected almost
since the inauguration of our p a t e n t system. T h e avowed purpose of these proposals is t o make articles t h a t are essential to health a n d life available t o t h e public a t a more reasonable price. If t h e y will accomplish this purpose without a t t h e same time retarding t h e development of new inventions a n d ultimately injuring competition there can be n o quarrel with them. Hut let us look a t this proposition carefully and see whether it will bring benefit to t h e public from a long-range viewpoint or whether it is merely another proposal to kill t h e goose t h a t lays t h e golden eggs of progress. Under our present American system, t h e development of industrial invention has outstripped t h a t of every other nation to such an extent t h a t there is really no close competitor. T h e provisions we made for the health a n d safety of our troops and t h e care given to our wounded astounded t h e world. Untold thousands of o u r troops are back with their families who would be lying buried in some distant spot except for t h e skill of our doctors a n d t h e resourcefulness of our pharmaceutical industry. T h e test of war has proved our present American system of free enterprise superior to t h a t of a n y other nation. Let us be very certain of w h a t we a r e doing before we a d o p t fundamental changes in t h e rules under which t h a t system has operated so successfully, particularly when t h e proposed changes are merely steps in t h e direction of other social philosophies t h a t have n o t y e t shown themselves able to produce results equal t o our own. A system of compulsory licenses will, in my opinion, retard r a t h e r t h a n stimulate progress in t h e field of pharmaceuticals. Let us consider a n example. W h e n prontosil was introduced into this country it was an original p a t e n t e d product owned by one concern. Immediately t h e chemists of all t h e other concerns set t o work to find something t o duplicate or surpass prontosil. T h e result was a n array of sulfa drugs, all of which afforded keen competition t o t h e original prontosil. If the other drug houses could h a v e contented themselves with licenses to manufacture and m a r k e t prontosil, do you think t h e y would have been equally zealous t o spend millions for research t o find substitutes for prontosil? I seriously doubt it. T h e same is t r u e with respect t o other potent drugs. T h e minute o n e concern introduces a new patented product that is commercially successful, it serves as a powerful stimulus to chemists of other concerns t o find something equal or better, and they usually succeed. T h i s is n o t only a leaven t o invention b u t a potent
CH EMIC AL A N D
ENGINEERING
NEWS
stimulus to competition as well. Compulsory licenses on the othex h a n d lay a dead h a n d on invention. I n s t e a d of spending so much for resear-ch it will be cheaper t o wait until someone else does the inventing and apply for a license. Besides t h e money can he sp>ent t o more certain a d v a n t a g e b y advert ising a n d detailing more heavilj' the jproduets one already has. Under such a system it would he justifiable for an i n d u s t r i a l concern t o give u p its research organization altogether and put in a d e p a r t m e n t devoted exclusively to the steady of other people's p a t e n t s . Price
Factor
The charge has been made t h a t the price of exclusively patented drugs is higher than t h e price of those generally available. This is undoubtedly true in some instances, b u t there are m i t i g a t i n g factors which a r e n o t generally c o n s i d e r e d by those who find this a serious objection to the prevailing patent s y s t e m . In the first place there is no consistent correlation between high price levels a n d patents. T h e laws of economics a p p l y t o patented articles a s well as others a n d m o s t manufacturers d o n ' t need t o b e t a u g h t that the3 r can m a k e a greater t o t a l profit by selling more units a t a reasonable price than b y holding the price wl^ere m a n y cannot afford to buy a drug. T h e record of the industry in reducing pricres of patented drugs to levels where the puljlic can afford to buy t h e m is, I believe, defensible. The fact t h a t there are people t o o p o o r to purchase a d e q u a t e food, clothizng, shelter, or drugs is another problem a,nd n o t necessarily a reflection on the r>atent system. But t o o often we find individuals on the one h a n d perfectly content tzo pa} r S6 for a bottle of whisky, $3 for d i n n e r , and $15 for a n evening's entertainment, a n d yet on the other, writing t o their Congressman because they have to pay $5 or $6 for something t h a t saved them t h e expense of a funeral. I n my opinion, t h e public's sense of values is farthest off the beam with respect to the worth of health a n d medical care. T h e exclusive specialties pay the way for drug research and t h e surest way to wither progress in the i n d u s t r y is to a d o p t measures which will m a k e it impossible for a concern t o enjoy that period of exclusivencss wtiich. t h e Cons t i t u t i o n a n d the patent hi"*vs intended it to have. If drug concerns are to be denied the full protection of our p a t e n t laws, it will have one inevitable result- I n order to create a substantial market for his product which is t h e same as tlmfc m a r k e t e d by everybody else, m a n u f a c t u r e r A will launch a large and expensive advertising program for his trade-marked article. It is t h e only method he hasle- ft t o create the volume of business esscnt iai to efficient production. Others will n x a t c h t h e effort and we will inevitably becoxne an industry in which advertising expenditures become V O L U M E
2 4,
NO,
enormously high. T h e small manufacturer, n o t being able t o stand t h e gaff of heav}' advertising and t h e specialty houses deprived of their exclusive specialties, will go under, and like the cigaret and soap manufacturers who have no u n i q u e or original products, we will sooner or later emerge as an industry with only a few powerful manufacturers and no little fellows. The competitive appeal t o t h e purchaser will very quickly come t o be based on meaningless distinctions between products. T h e most costly project in advertising is t h a t which a t t e m p t s to convince t h e public t h a t a n insignificant distinction is significant. The cigaret, soap, a n d gasoline advertising campaigns are examples of (his. W h e n a drug product or even a cigaret or a bar of soap is genuinely superior, the public, a n d hotter, the medical profession, soon catches o n a n d it doesn't t a k e hundreds of millions of dollars of ring-around-the-rosy advertising a year to establish it. Under a system of compulsory licensing, the public will pay for advertising instead of research and the product will n o t be cheaper in t h e long run. Success in competition will be d e t e r m i n e d by the q u a n t i t y a n d quality of advertising rather t h a n b y the originality a n d superiority of t h e products manufactured. Which m e a n s simply t h a t the real competitors will be the advertising b u d g e t s and t h e slogan writers rather t h a n research budgets and chemists. Certainly this is n o t in t h e public interest. I t is fool's gold competition. If a firm or an independent inventor is compelled to t u r n over the invention to all comers, it means t h a t the asset value of t h e invention to t h a t particular firm or inventor is depreciated. By all t h e laws of economics, as the a s s e t value of invention is depreciated, the r e t u r n to inventors will, in the long run, be less whether the inventor works for a c o m p a n y or for himself. I need not refer to the deplorable secrecy which will inevitably return to industry if exclusive patent protection is removed. W e can anticipate a r e t u r n of the conditions which were once seen in other indus-
23 » .DECEMBER
Theodore
10,
G.
1946
Klumpp
tries in which secret processes were carried out in isolated wooden shanties, and a hocus pocus of chemical manipulations introduced to throw competitors off the scent. One firm I was told a b o u t purchased $15,000 worth of chemicals a month to b e clumped down the sewer as a smoke screen to hide a process it was using. Let us n o t forget the arts that have been lost throughout history because they were kept secret. We will also see a return of onerous contracts with chemists and intercompany understandings to prevent t h e m from carrying secrets from one competitor to another. All this is a return t o the dark ages, and not progress. F o r many years Great Britain h a s had compulsory licensing provisions as p a r t of its p a t e n t policy. There is n o evidence that this has had any beneficial effect upon the public health and welfare of t h e British and the consensus is that t h e provision is a flat failure. Fair-minded Englishmen who have been in this country are quick to admit t h a t we have been far ahead of t h e m in t h e development of drug t h e r a p y and manufacturing techniques. It is not without significance t h a t we were called upon to supply Great Britain and t h e British Army as well as all the rest of our Allies with the drugs they needed. I t was not only a question of raw materials, bombings, and supplies. Through the stimulus of our system of free enterprise we had a flourishing, efficient, well managed drug industry with m a n y hundreds of factories that could be turned to t h e task of supplying drugs for t h e entire world on short notice. Defining to Public
Indispensability Welfare
A number of individuals who profess to believe in our p a t e n t system h a v e taken the position t h a t compulsory licensing is unsound for industry generally but would be suitable*in fields of endeavor related t o public health and welfare. W h a t they fail to see is t h a t in our modern complex civilization there is no way of determining what is and what is not essential to public health and welfare. Who is to say t h a t the telephone or radio which summons t h e doctor, or t h e automobile with all its equipment in which he rides, or even t h e road which enables him t o reach his destination in a hurry, is less essential t o health a n d welfare than t h e drug which he administers—that is, if he arrives in time. How essential to health are food, shelter, eoal, oil, shipping, transportation, and communications. During the past year a series of strikes on a national basis has given us a broadened conception of how many diversified fields of endeavor are essential to health and welfare. Indeed we have come to t h e realization t h a t there are no isolated materials or activities peculiarly essential to human health and welfare. I t is the totality of our social, scientific, and economic effort t h a t serves 3175
health and welfare. One cannot crystallize out of all this a single active principle, whether it be called drugs or anything else, and say that this alone is dedicated to the service of health and human welfare. The idea of compulsory licensing for only drugs and medical articles is truly a snare and a delusion. Anyone who can see beyond the end of his nose will recognize that i t leads inevitably to compulsory licensing for all invention. Patent
Pooling
Proponents of compulsory licensing of patents have pointed to the automobile industry which has a patent pooling arrangement, as an example of the success which attends such a system. Let mc remind t h e listener that the manufacture of cars is concentrated in four o r five major companies. With all the patents available no small concern could hold its head above water and compete with t h e economic giants of the auto industry. Even with an invention t h a t produced a superior car, a new concern would find it virtually impossible to obtain the financial backing necessary to manufacture cars on t h e scale necessary to achieve the economics of mass production. Those already in the industry make vast expenditures for good will and meaningless name advertising, rather than depend upon substantially unique features t o sell their cars. I t takes a n industrial Goliath like Henry Kaiser to challenge the economic power of the large units in the industry, and even the securities of his company were legally barred in some states. In my opinion patent pooling is a threat to sound competition. It places competition on an artificial fool's gold basis a n d tends toward aggregate monopoly. T h e economic effect of this on industrial progress is a subject which deserves some of the attention which our economic planners are giving t o our patent system. Before
Passing
Judgment
.
Before we accept radical changes in our patent system let us do two things: let us first of all count our blessings under that system and secondly, a s k ourselves whether the proposals stand alone as a r e form or whether they are merely one imp o r t a n t piece in the pattern of proposals t h a t are being advanced t o change our social and economic system step b y step toward Communism. It has become fashionable in certain quarters t o call patents monopolies, b e cause some people do not like patents and it suits their purpose to apply a n ugly word t o them. T h u r m a n Arnold hit t h e nail o n the head when he said, " T h e trick is to find a pair of polar words in which t h e nice word justifies your own position a n d t h e b a d word is applied to the other fellow". B u t these folks forget that all property is monopoly. Property is merely the right t o exclude. If I own a watch, i t belongs to me in t h e sense t h a t if anyone tries t o take it away from m e , the law will
3176
protect me. I own a house, a n d the law permits me to keep uninvited people out. These generalizations serve t o point out something t h a t is going on in this country. There are certain equalitarians who object to the concept of private property. T h e y are t h e "share the wealth" people. T h e y want to share the property o t h e r people own instead of creating new property. This is a s t a t i c , not a dynamic, philosophy. I t is negative*. These people object t o patents particularly. An idea is property. But when it is put into practice i t is property t h a t is difficult to protect. Therefore, there are special laws to protect this form of property. When an idea concerns something t h a t is new and useful to humanity, t h e patent laws provide t h a t + 1, .e inventor may enjoy t h e property rights inherent in his idea for 17 } r ears. And so p a t e n t s are property for a limited time. T h e insidious attack now being made on the patent system under the n a m e of compulsory licensing means simply t h a t airyone who wants to share t h e patentee's property can d o so. It is as logical t o say that anyone who wants to share my house or m y suit of clot lies is entitled to d o so, against m y will. I t is no answer to say that t h e property has been abused by some people. M a y b e it has been in some instances. Any property can be abused. A man may p u t u p a slaughter house on p r o p erty h e owns in a residential district; so we have zoning laws. Men m a y m a k e contracts t h a t restrain trade; so we h a v e antitrust laws. There are careless drivers
of automobiles who run people down in t h e public streets; so we have speed laws and traffic regulations. We d o not prohibit the manufacture of automobiles. The remedy is to stop t h e abuse—not t o destroy the property. If p a t e n t s are misused, laws can be drafted t o stop t h e misuse,, if present laws are n o t enough. If property is abused, legislation should be directed at the abuse, not a t the property. Any form of compulsory licensing of patents, however plausibly i t m a y b e presented, is an attack o n the integrity of property, and property of a k i n d which most deserves encouragement, t h e property that a m a n himself creates o u t of his own thoughts, his own research, and which, b u t for him, would not exist. I a m not reluct a n t to speak in behalf of p r i v a t e property. It i s one of the important cha r aeteristics t h a t distinguishes our society from the communistic state. E a c h step i n the weakening of the integrity of private prope r t y is a step away from our way of life and toward something we see practiced in some other countries. Compulsory licensing of patents mean compulsory sharing of p a t e n t property with others. This is nothing more than the commuiuzation of the patent system. T h e danger is not . t h a t we will rush down t h e road t o Communism but that step by s t e p we will find ourselves there. T h a t is the long-range issue we must t h i n k a b o u t when w e consider radical changes in t h e direction of Communism in one of our most important American institutions, o u r patent system.
National Drug Trade Conference A STAFF REPORT X H E annual meeting of the National Drug Trade Conference was held a t t h e Hotel Statler, Washington, D . C , Nov. 8. Robert P. Fischelis, chairman of t h e Committee on Uniform Drug Legislation submitted for the endorsement of the conference proposed legislation reflecting t h e most recent thinking of the profession a n d industry on this subject. Proposed legislation was approved for a Uniform S t a t e Food Drug and Cosmetic Act, Uniform Caustic Poison Act, and Uniform S t a t e Barbiturate Act. A Uniform Livestock Remedy Act was received for further study and contact with other interested groups outside the National Drug T r a d e Conference. Further study by the committee was requested on the Uniform State Pharmacy Act and Uniform S t a t e Poison Act; and a Uniform S t a t e Narcotic Act was approved in principle. J a m e s F. Hoge said, in his analysis of the Lanham Trademark Act (Public Law 489), t h a t t h i s new act "will n o t only d e serve b u t demand the careful attention of all t r a d e m a r k owners and the thorough study of trademark attorneys". T h e intent of tins act is to regulate commerce within the control of Congress b y m a k i n g actionable t h e deceptive a n d misleading
CHEMICAL
use of marks in such commerce; to protect registered marks used in such commerce from interference b y S t a t e or territorial legislation; to protect persons engaged in such commerce against unfair competition; to prevent fraud and deception i n such commerce b y the use of reproductions, copies, counterfeits, or colorable imitations of registered marks; and t o provide rights and remedies stipulated by treaties a n d conventions between t h e United States and foreign nations regarding trademarks, trade names, and unfair competition. Appointments t o the executive committee for the next y e a r were made as follows: Carson P . Frailey, president of t h e conference, acting chairman; Robert P. Fischelis, American Pharmaceutical Association; George F r a t e s , National Association of Retail Druggists; Ernest Little, American Association of Colleges of Pharmacy; E. L . Newcomb, National Wholesale Druggists Association; C. F . Cullen, Proprietary Association of America; P . H. Costello, National Association of Boards of Pharmacy; and 11. C. Schlottercr, Federal Wholesale Druggists Association. No one h a s been appointed t o represent the American Pharmaceutical Manufacturers Association.
AND
ENGINEERING
NEWS
