COVID-19 Shows What Innovation Looks Like Without Patents (Spoiler: It Works)
This post is one of a series of posts we’re running this week in support of Patent Quality Week, exploring how better patent quality is key to stopping efforts that hinder innovation.
The COVID-19 pandemic has given rise to a fascinating natural experiment: What does innovation look like when patents are largely out of the picture? For Patent Quality Week, I’ll be looking at the development of COVID-19 vaccines and what lessons can be drawn for reforming the patent system.
The development of COVID-19 vaccines has largely progressed without any noticeable effect of patents. None of the vaccine developers have sued competitors for patent infringement, and Moderna has even pledged not to assert patents during the pandemic. To be sure, patents have not been out of the picture entirely: the developers are getting plenty of them, and analysts are predicting the lawsuits to start as early as the first booster shots. But even in this world just partially free of patent threats, a few things are worth noticing.
Start with the sheer number of COVID-19 vaccine products. The two mRNA vaccines from Pfizer/BioNTech and Moderna coexist with each other and vaccines from Johnson & Johnson, AstraZeneca, Novavax, and others. In any other situation, these companies would right now be in massive patent litigation, and many of the firms would likely have dropped their products or not even entered in the first place. Along with non-patent incentives such as government funding and social prestige, the absence of patent assertion has helped open the door to multiple similar vaccines being available on the market.
Similar, but not the same. Moderna’s vaccine can be stored at higher temperatures than Pfizer’s, J&J is a single dose, Novavax is based on more traditional vaccine technology. Each vaccine has distinct characteristics preferable for certain consumers and certain settings.
Multiple suppliers and product differentiation are hallmark features of many competitive markets. It’s simply good business sense for competitors to make slightly different products that serve different consumers, and vaccine manufacturers are no exception. As a result, economists find that “neck-and-neck” competition spurs innovation when multiple firms each try to outdo the others through incremental improvements and differences.
The presence of multiple, differentiated competitors has been a tremendous boon to the American COVID-19 response. Health care providers can opt for a vaccine technology that best fits their facilities, and some individuals have gotten to choose between mRNA or one-and-done. More importantly, competition means robust supply chains. Contamination of production batches and discoveries of serious side effects didn’t halt the flow of vaccines because other products were in place.
Patents could easily have upended vaccine deployment in the United States by constraining the market to a single supplier. For comparison, during the 2001 terrorist anthrax scare, the only approved drug for anthrax was Bayer’s patented product Cipro. Unlike the COVID-19 vaccine manufacturers, though, Bayer vigorously defended its patents and refused to allow competitors to make Cipro, which led to national panic and tense negotiations until the Bush administration pressured the company into major price and manufacturing concessions.
The word “monoculture” is sometimes used to describe how dependence on a product or company creates a potentially devastating single point of failure. Originally referring to agricultural wipeouts due to single-crop plantings, the term was popularized by computer security experts who credited a monoculture of Microsoft Windows with the catastrophic spread of computer worms. Others (including myself) have worried about monocultures of cell phone chips, encryption software, and global shipping canals.
The medicine for monocultures is competition to ensure that if one product fails, others will continue to meet the public’s needs. Multiple vaccine options and suppliers are plainly better than panic-buying the last boxes of Cipro on the shelf. Given the potential of patents to create monocultures, how can the patent laws be written to avoid them and foster valuable competition?
There are at least two answers. First, the patent system needs flexibility to deal with unexpected situations such as pandemics and national emergencies. A law called section 1498 already provides this flexibility by allowing the United States to authorize use of any patented technology, with compensation to the patent holder, and Chris Morten and I have argued that the government should be more proactive in asserting this authority. The need for flexibility also explains the importance of the United States’ support for international patent waivers. While the COVID-19 vaccine patent truce has resulted in sufficient supply for the United States, worldwide patents have helped to dissuade some foreign drug manufacturers from producing their own. An international waiver that overcomes patent barriers to competition could add more, diverse vaccines to the market. And in view of arguments that vaccine patents are irrelevant in view of manufacturing bottlenecks, it is worth asking whether new international entrants freed from patent restrictions might discover alternative ways of manufacturing vaccines, thereby pushing the bounds of innovation.
More important is to avoid granting patents that enable monocultures in the first place, and that’s where patent quality becomes important. Done right, patents should encourage product differentiation by restricting close copies of a technology while allowing alternate solutions to problems. Monocultures arise from patents on broad swathes of solutions or even on the problem itself—say, patenting the idea of vaccinating against COVID-19 versus a patent on the biochemical structure of a particular vaccine. Especially for computer software, broad problem-covering patents are far too common—patents on scanning to email, accounting for currency exchanges, and one-click online shopping, for example. At best, such patents fall into the hands of trolls who use them to harrass startups and other companies for money. At worst, they become tools that large, dominant firms can use to suppress competitors, setting the public up for the failures that monocultures can cause.
There are many options for enhancing patent quality and avoiding the dangers of monoculture: rigorously applying law that prohibits patents on computer algorithms and laws of nature, giving patent examiners sufficient time to review patent applications, and enhancing lower-cost ways for competitors to challenge patents issued wrongly. Many lawmakers have been receptive to these ideas, with the White House’s recent executive order and hearings in Congress both looking into how to keep patents from deterring competition. But some have pushed in the opposite direction of more patents regardless of quality. There have been recent efforts to change the law to allow for more patents on software and natural discoveries, patent examiners are overworked, and the Patent Office has made it increasingly hard to challenge questionable patents.
These seemingly backward steps are taken out of fear, a hypothetical worry pushed by patent-holding industries that a more rigorous patent system will destroy incentives to innovate. Perhaps the most important story to be learned from the COVID-19 vaccines is that this worry is unfounded. Multiple competing innovators not bogged down with patent lawsuits can function better, innovate more, and robustly serve public needs better than an industry of patent-backed monocultures. Bold steps toward patent quality should be cause for celebration, with an eye toward a competitive technological future.
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July 22, 2021 at 01:41PM