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ABA Health eSource
November 2006 Volume 3 Number 3

What Happens To Intellectual Property In A Public Health Emergency? Legislative Approaches To An Emerging Issue
by David Joyal 1 , Greenberg Traurig, Florham Park, NJ

Recent public health events such as the 2001 anthrax events and the 2004 avian flu scare have highlighted the tension between two public interests related to intellectual property. First, the robust protection of intellectual-property rights is essential to innovation and to development of new technologies for use against future pandemics. However, some abrogation of intellectual property rights may be needed in order for governments to quickly and cost-effectively stockpile needed emergency supplies.

In light of this tension, when and how may the government exercise its eminent domain power during a public health emergency? Further, what is the scope of intellectual property rights that might be abrogated in such a circumstance? Proposed and existing legislation offers a glimpse as to how the declaration of a public health emergency might affect the rights of trade secret and patent owners.

I. THE BASICS – PUBLIC HEALTH EMERGENCIES, EMINENT DOMAIN AND TAKINGS LAW

A. What is a Public Health Emergency?

“Public Health Emergency”, as defined for purposes of this discussion, relates to the definition of a “Public Health Emergency” contained in the Model State Emergency Health Powers Act, (the “MSEHP Act”). 2 As defined in the September 16, 2003 version of the MSEHP Act 3 , “Public Health Emergency” means an occurrence or imminent threat of an illness or health condition that:

[a] is believed to be caused by any of the following: (i) bioterrorism; (ii) the appearance of a novel or previously controlled or eradicated infectious agent or biological toxin; or (iii) a natural disaster, a chemical attack or accidental release, or a nuclear attack or accident; and

[b] poses a high probability of any of the following harms: (i) a large number of deaths in the affected population; (ii) a large number of serious or long-term disabilities in the affected population; or (iii) widespread exposure to an infectious or toxic agent that poses a significant risk of substantial future harm to a large number of people in the affected population.

B. Who Can Declare A Public Health Emergency?

Public health legal authority has traditionally rested with the states, as the powers of isolation, quarantine, and other public heath powers are considered part of the police powers expressly reserved to the states under the Constitution. 4 For example, the MSEHP Act vests the power to declare a public health emergency in the governors of the various states. 5

At the federal level, Section 319(a) of the Public Health Service (“PHS”) Act (42 U.S.C. § 247d), authorizes the Secretary of the Department of Health and Human Services (“HHS Secretary”) to declare a public health emergency and “take such action as may be appropriate to respond” to that emergency consistent with existing authorities. Finally, the President may also declare an emergency under the National Emergencies Act (50 U.S.C. § 1601 et seq.). 6

C. When Is Modification Of Intellectual Property Rights Permissible Under Eminent Domain Law?

In order for the government to exercise its eminent domain power, two conditions must exist: (1) the state must demonstrate a sufficient “public use” for taking the property; and (2) the state must pay “just compensation” as required by the “takings clause” 7 of the Fifth Amendment of the U.S. Constitution. To determine whether a “taking” has occurred, courts generally look to whether the government has interfered with a reasonable investment-backed expectation. 8

The term “public use” has been expansively interpreted by state and federal courts. For example, the recent U.S. Supreme Court decision of Kelo v. New London 9 illustrates an expansive view of public uses -- justifying the transfer of private property from one private owner to another. Such eminent domain power is not restricted to real property; indeed, it may extend to intangible property. 10 Further, various state supreme courts have held, for example, that the doctrine of public use extends to “matters of public health, recreation, and enjoyment.” 11

II. TWO CASE STUDIES OF INTELLECTUAL PROPERTY RIGHTS IN A PUBLIC HEALTH EMERGENCY

A. Patents

1. Current Limits On Patents In Public Health Emergencies

Protection of intellectual property rights is ingrained in the U.S. Constitution under Article 1, Section 8, which provides that Congress shall have the power “[t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” A patent for an invention is the grant of a property right to the inventor, issued by the Patent and Trademark Office. 12 The right conferred by the patent grant is “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or importing it into the United States. What is granted by a patent is not the right to make, use, offer for sale, sell or import--but, rather, the right to exclude others from making, using, offering for sale, selling or importing the invention.

In addition to securing rights for limited times, U.S. law provides that the government may modify these rights under certain circumstances. For example, this year marks the 25th Anniversary of the passage of the Bayh-Dole Act. 13 Several key dormant powers within the Act provide a statutory basis for compulsory licensing of patents rights during a public health emergency, based on public use. Specifically, 35 U.S.C. § 203 provides for “march-in” rights that authorize a federal funding agency to require “the contractor, an assignee, or exclusive licensee” to grant a license to an invention (if the licensee, assignee, or contractor fails to timely develop the invention). Alternatively, the agency may grant the license itself. Also, under 35 U.S.C. § 202(c)(4), the Federal funding agency has a “reservation of rights” whereby it retains a nonexclusive, nontransferable, irrevocable, paid-up license to practice (or to have practiced) for, or on behalf of, the United States any subject invention throughout the world. However, several qualifications and policy considerations have meant that the U.S. government has yet to exercise either of these rights in the context of a public health emergency. 14 But, the mere existence of such health-related dormant compulsory licensing powers provides an important carrot/stick mechanism for influencing access to medical technologies.

2. Proposed Legislation:

One response to the problems associated with exercising the government’s “march-in” eminent domain authority is the “Public Health Emergency Medicines Act.” This Act was introduced to Congress on several previous occasions, including shortly after the Fall 2001 anthrax scare on November 6, 2001. On October 25, 2005, Representative Sherrod Brown introduced the bill as HR 4131. In a letter written to President Bush, 15 he asserted that “this legislation gives the Executive Branch expedited authority to temporarily break a patent if that is the only way to secure sufficient supplies of an emergency medicine” and further noted that “H.R. 4131 creates a legal framework for expedited access to emergency medicines, avoiding the uncertainty surrounding use of eminent domain authority while ensuring that patent holders receive compensation rewarding them for their medical innovations.” 16

The bill 17 proposes to amend Title 35 of the United States Code to expressly provide for compulsory licensing of patented inventions in the case of a public health emergency. Such a determination may be made by the Secretary of HHS. 18 In the event that the Secretary authorizes such compulsory licensing, the bill provides that the patent-holder shall be paid “reasonable remuneration” for the use of the patent. Notably, reasonable remuneration under the Act is determined administratively by HHS rather than by a judge evaluating the extent of the taking. Reasonable remuneration is defined in the context of several criteria, including (among others) evidence of the risks and costs associated with commercial development of the invention; the degree to which the invention benefited from publicly funded research; the need for adequate incentives for the creation and commercialization of new inventions; and the public health benefits of expanded access to the invention. 19 The bill also provides that the Secretary of HHS may authorize the use of a patent to “export medicines or other healthcare products that are needed to address global public health emergencies, when the legitimate rights of the patent holder are protected in the export market.” 20 Finally, the bill provides for immediate FDA approval of manufacture of the patented entity by a generic manufacturer, thus greatly expediting the new drug approval process.

The Public Health Emergency Medicines Act was referred to the House Judiciary Subcommittee on Courts, the Internet, and Intellectual Property on February 6, 2006. 21 While it was not acted upon in the 109 th Congress, the prospect of a change in the balance of power in the 110 th Congress may enhance the likelihood that this bill will be reintroduced to greater effect.

B. Trade Secrets

A trade secret is generally defined as information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 22 Unlike a patent, trademark, or copyright, a trade secret is not disclosed to the public in exchange for a property grant; thus, once a trade secret is publicly known it ceases to have value as an intellectual property asset. Trade secrets are governed by state law, and while many states have adopted versions of the Uniform Trade Secrets Act, the enforcement and interpretation of such statutes varies by state.

Under certain limited circumstances, the government—either state or federal—may require disclosure of a trade secret. For example, the Emergency Preparedness and Community Right-To-Know Act (“EPCRA”) 23 requires disclosure of trade secrets to the Environmental Protection Agency under certain circumstances. Sections 301 through 303 of EPCRA require that facilities develop emergency response plans that community officials can use at the time of a chemical accident. Sections 311-312 further require that employers must maintain a material safety data sheet (MSDS) for any hazardous chemicals. 24

Section 323 of EPCRA further addresses trade secrets as they apply to EPCRA sections 303, 311, 312 and 313, and allows such trade secret information to be disclosed to health professionals who need the information for diagnostic and treatment purposes or to local health officials who need the information for prevention and treatment activities. In non-emergency cases, the health professional must sign a confidentiality agreement with the facility and provide a written statement of need. In medical emergencies, the health professional, if requested by the facility, provides these documents as soon as circumstances permit.

The question for property owners in the context of a trade secret then becomes-- if a company’s trade secrets are publicly disclosed, does such a public disclosure amount to a taking? In the context of at least one other federal statute, the Supreme Court has answered this question in the negative, provided that the government adequately protects the confidentiality of the information. In Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1002 (1984), the Supreme Court confronted the issue of whether a taking occurs when pesticide companies submit confidential data to the EPA in compliance with the Federal Insecticide, Fungicide and Rodenticide Act. 25 It held that the EPA regulations requiring disclosure of trade secret information constituted a taking if the information’s confidentiality was not adequately protected. However, by failing to address the government’s interest in disclosure of a trade secret, the Court failed to provide a framework as to when public health concerns might justify disclosure of a trade secret without compensation-- or provide an adequate framework for compensation of such takings. 26

CONCLUSION

Federal, state and local governments have not as yet moved to limit the scope of intellectual property rights in the context of a public health emergency. However, the Kelo and Ruckelshaus decisions and recent legislative proposals have demonstrated a variety of approaches to the issue, and have spotlighted the difficult balance between and among protecting innovation and protecting the public’s health. Given the importance of innovation, intellectual property and emergency preparedness in the 21 st century, this dynamic balance will continue to rapidly evolve.

1 Patent Attorney, Greenberg Traurig, LLP. B.A. Skidmore College, 1997; J.D., Emory University School of Law, 2003. Any opinions expressed in the above article are solely those of the author and do not represent in any way the positions of his employer. The author wishes to thank Sumita Chowdhury-Ghosh, J.D., PhD of the Centers for Disease Control and Prevention's Office of Technology Transfer for her significant contributions to this article.
2 The MSEHP Act is a proposal by the Center for Law and the Public's Health, a joint venture of Georgetown University and Johns Hopkins University, to aid America's state legislatures in revising their public health laws to more effectively control epidemics and respond to bioterrorism. As of July 15, 2006, the Act has been introduced in whole or part through 171 bills or resolutions in forty-four ( 44) states, the District of Columbia, and the Northern Marianas Islands. Thirty-eight ( 38) states [AL, AK, AZ, CA, CT, DE, FL, GA, HI, ID, IL, IN, IA, LA, ME, MD, MN, MO, MT, NV, NH, NJ, NM, NC, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WI, and WY] and DC have passed a total of 66 bills or resolutions that include provisions from or closely related to the Act. See The Turning Point Model State Public Health Act State Legislative Update Table As OF July 15, 2006, available at http://www.publichealthlaw.net/Resources/ResourcesPDFs/MSPHA%20LegisTrack.pdf (last accessed October 1, 2006).
3 Available at http://www.hss.state.ak.us/dph/improving/turningpoint/PDFs/MSPHAweb.pdf (last accessed October 1, 2006).
4 See "Fact Sheet on Legal Authorities for Isolation/Quarantine", available at http://www.cdc.gov/ncidod/SARS/factsheetlegal.htm (last accessed October 22, 2006).
5 See Section 6-102 of the MSEHP Act, "Declaring a State of Public Health Emergency" : "[a] Declaration. A state of public health emergency may be declared by the Governor."
6 See "CDC Public Health Emergency Response Guide for State, Local and Tribal Public Health Directors", available at: http://www.bt.cdc.gov/planning/responseguide.asp (last accessed October 2, 2006).
7 The Fifth Amendment of the U.S. Constitution's Takings Clause states that "nor shall private property be taken for public use, without just compensation."
8 Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984).
9 Kelo v. New London, 545 U.S. 469 (S.Ct. 2005).
10 Kimball Laundry Co. v. United States, 338 U.S. 1, 11 (1948); Bethards, Matthew S. "Condemning A Patent: Taking Intellectual Property By Eminent Domain", 32 AIPLA QJ 81, 84 (Winter, 2004).
11 32 AIPLA QJ at 84; City of Oakland v. Oakland Raiders, 646 P.2d 835 ( Cal. 1982).
12 See "What Are Patents, Trademarks, Service Marks, or Copyrights?", available at http://www.uspto.gov/web/offices/pac/doc/general/whatis.htm (last accessed 10/20/06).
13 Bayh-Dole is codified in 35 U.S.C. § 200-212, and is implemented by 37 C.F.R. 401 et. seq.
14

The stated reasons for refusing to exercise these rights is that the "extraordinary remedy of march-in is not an appropriate means for controlling prices" [of drugs] or that "the available information fails to demonstrate an unmet health need that is not satisfied." The standards for authorizing "march-in"; rights are as follows:

(1) action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;

(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;

(3) action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or

(4) action is necessary because the agreement required by section 204 [ 35 USC 204] has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204 [ 35 USC 204].

15 Letter from Sherrod Brown to President G.W. Bush, available at http://lists.essential.org/pipermail/ip-health/2005-November/008638.html (last accessed October 10, 2006).
16 Id..
17 The full text of HR 4131 as introduced is available on the Library of Congress' THOMAS website. http://www.thomas.gov/cgi-bin/query/D?c109:1:./temp/~c109ajalrN:: (last accessed 10/10/06).
18 Id., §158(a).
19 Id. , §158(b)(1) - (9) et seq.
20 Id. , §158(c).
21 http://www.thomas.gov/cgi-bin/bdquery/z?d109:HR04131:@@@D&summ2=m& (last accessed October 10, 2006).
22 Definition taken from the Uniform Trade Secrets Act, which has been adopted by states. See text of the Uniform Trade Secrets Act , available at http://www.law.upenn.edu/bll/ulc/fnact99/1980s/utsa85.htm (last accessed October 10, 2006). Virtually all states have adopted a portion of or modified version of the Uniform Trade Secrets Act, which was drafted by the National Conference of Commissioners on Uniform State Laws in 1970 and amended in 1985. See http://www.ipwatchdog.com/tradesecret.html (last accessed October 10, 2006).
23 42 U.S.C. 11001 et seq. (1986).
24 See "The Emergency Planning and Community Right To Know Act Factsheet," available at http://yosemite.epa.gov/oswer/ceppoweb.nsf/vwResourcesByFilename/epcra.pdf/$File/epcra.pdf (last accessed 10/10/06).
25 See Megan E. Gorman, Going Up In Smoke: The Effect of Philip Morris, Inc. v. Harshbarger & Philip Morris, Inc. v. Reilly On The Takings of Intellectual Property, 3 Rutgers L.J. 771 (Spring 2002) for an excellent discussion of the Ruckelshaus case.
26 Id. at 780 - 81.
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