Jeremy Corbyn, Leader of the Labour Party, recently announced a report entitled "Medicines For the Many: Public Health before Private Profit", which sets out a proposed set of policies on access to medicines in the UK, which are reflected in the Labour Party's manifesto launched last week. An accompanying press release described the report as "a radical programme of reforms to make life-changing drugs available at affordable prices and create a health innovation system that will put public health before private profit". In this article, we summarise key aspects of the proposed policies, consider the relevant legal background and analyse potential implications for companies operating in the life sciences sector, with a particular focus on issues relating to intellectual property. We also touch on the potential for companies which may be affected by the Labour Party's proposed changes to the sector, to look to public law and human rights related avenues of challenge, as well as to investment treaties, to mitigate risk.

1. Key points

The Medicines for the Many report (the "Report") envisages a potential future Labour government "actively [using] voluntary and compulsory licenses to secure affordable generic versions of patented medicines where the patented product cannot be accessed". The Report proposes doing this either via claiming the use of patented inventions for services of the Crown ("Crown Use"), or via applications for compulsory licenses. The powers to access patented medicines in these ways are already provided for in the Patents Act 1977, which also includes provisions for compensation for affected patent owners, but there is little case law on their use in practice.

We envisage that any exercise of the Crown Use or compulsory licence provisions is likely to give rise to litigation over the nature and extent of these powers and associated provisions (such as compensation), particularly given the lack of guidance available from the Courts to date. Decisions by the Government and other public bodies (such as NICE) in connection with the assertion of Crown Use or as part of an application for a compulsory licence must be taken in accordance with public law principles (such as acting within their powers and in a procedurally fair manner), otherwise it may be possible to challenge them by way of judicial review. It is also possible that a compulsory licence or Crown Use might amount to a de facto expropriation or a control on use of property within the meaning of human rights legislation and also as generally protected against in the numerous bilateral investment treaties to which the UK is a party.

Further, since the UK is party to the international Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS"), any amendments to UK law proposed by a future Labour government in this regard will have to be compliant with the terms of that Agreement. Since TRIPS provides that "unauthorised use", which includes compulsory licensing and Crown Use, should only be permitted where, amongst other things, a proposed user has first made an effort to obtain a licence on reasonable commercial terms and that a patent owner will be entitled to adequate renumeration, any proposed amendments to the relevant compensation provisions provided for in the Patents Act will have to be considered carefully in this light.

The Report also states that a Labour government intends to review "non-patent monopoly protections on medicines" such as data/marketing exclusivity, SPCs and patentability criteria. However, as regards patentability requirements, since the UK is a signatory to the European Patent Convention (the "EPC"), an international agreement that is entirely separate from the EU and its institutions and as such, not affected by Brexit. Consequently, a UK government's ability to alter unilaterally the patentability requirements applying to patents in the UK is limited. The UK's scope to amend provisions on data/marketing exclusivity and SPCs may be similarly limited, subject to the terms of the UK's exit from the European Union.

It may therefore be difficult for a Labour government to achieve a number of the aims set out in the Medicines for the Many Report without international cooperation.

2. Labour's proposal in brief

The Report extends to 52 pages and contains a discussion of a number of proposed policies, including some which the Labour Party states that it would implement immediately were it elected, and others which would be put into effect in the longer term. In the press release accompanying the Report, the immediate actions are summarised as follows:

  • Actively use voluntary and compulsory licenses to secure affordable generic versions of patented medicines where the patented product cannot be accessed;
  • Increase the transparency of medicine prices, the true cost of research and development and pharmaceutical company finances so that the NHS can have informed discussions on drug pricing;
  • Resist efforts to increase corporate control over medicine and drug intellectual property rights in future trade deals by excluding provisions that go beyond the TRIPS agreement.

The longer term actions are described in the same press release as:

  • Creating a publicly owned pharmaceutical company to manufacture generic drugs and medicines to sell to the NHS at affordable prices, with any profits reinvested back into the existing network of publiclyfunded research and development facilities, used to offset the cost of more expensive drugs or fund nondrug based public health interventions to improve health outcomes;
  • Separate innovation from price incentives by replacing the current system – where research and development funding is channelled into the most lucrative and profitable medicines – with a system of innovation funding based on upfront grants or subsidies and funding awards tied to priorities that are most socially valuable and challenging – such as antimicrobial resistance;
  • Attach public interest conditions to any public funding for research and development so any organisation receiving taxpayers' money will need to ensure patient access and affordability, share their knowledge and disclose data on their research and development spending.

3. Crown Use and Compulsory Licenses under UK Patent Law

Although the Report in places refers to "compulsory licences", elsewhere it appears that what is envisaged is the exercise by a future Labour government of the broad powers for the use of patented inventions for services of the Crown ("Crown Use") that already exist under the Patents Act 1977. The distinction between the compulsory licence regime and the Crown Use provisions may be important in this context, for example when it comes to the compensation which must be provided to the patentee.

Crown Use

Sections 55 to 59 of the Patents Act 1977 provide for the use by any government department or any other person authorised in writing by a government department, of patented inventions for "services of the Crown" (which is defined, in section 56(2)(b), as including the production or supply of specified drugs and medicines). Drugs and medicines will be considered 'specified' for these purposes if they are (i) required for the provision of primary medical services, pharmaceutical services or various medical dental services under certain legislation relating to the National Health Services of the UK; and (ii) specified for this purpose in regulations made by the UK Secretary of State.

Where patented medicines or drugs meet these requirements, section 55(1)(a) of the Act allows the making, using, importation, keeping, selling, offering for sale, disposing or offering to dispose of such patented products (including products obtained directly by means of a patented process), without the consent of the patentee. Section 55(7) requires that the government must notify the patentee as soon as practicable after the use is begun (or the patent is granted, if later). If the government supplies a patented product to a third party under the Crown Use provisions, that third party may deal with the product as if the Crown were the patentee, according to section 55(8).

As far as compensation is concerned:

  • if the invention in question has been "recorded by or tried by or on behalf of a government department" before the priority date of the invention, then no royalty or other payment by way of compensation is required in respect of Crown Use of the invention (section 55(3));
  • where the invention in question has not been "recorded by or tried by or on behalf of a government department" before the priority date of the invention, any Crown Use must be on terms agreed between the relevant government department and the patentee, with approval of the UK Treasury or, where no agreement can be reached, as determined by a Court pursuant to a reference by either party under section 58 (section 55(4)) – case law relating to compensation pursuant to the Crown Use provisions of the Patents Act 1948 suggest that the approach of the court will be to determine what a willing licensee and licensor would have agreed as a reasonable royalty by way of compensation for the use in question1;
  • in addition to the compensation payable under section 55(4), the government department concerned in Crown Use must pay the patentee (or their exclusive licensee) compensation for "any loss resulting from his not being awarded a contract to supply the patented product or perform the patented process or supply a thing made by means of the patented process". In determining the level of compensation, regard must be had to the profit which the patentee/licensee would have made on such a contract, provided that such a contract could have been fulfilled from the patentee/licensee's existing manufacturing or other capacity, though notwithstanding the existence of circumstances rendering the patentee/licensee ineligible for the award of such a contract (section 57A).

It is worth noting that in some situations relief can only be ordered by the court in relation to Crown Use where the patentee can prove that (i) the specification of the patent was framed in good faith and with reasonable skill and knowledge; and (ii) the relief is sought in good faith.

The powers of Crown Use, both under the Patents Act 1977 and its predecessor, section 46 of the Patents Act 1949, remain almost entirely untested in litigation. Indeed, the last time that a case came to court in which the British government was using Crown Use provisions in relation to the supply of a medicinal product, specifically with the aim of reducing expenditure in the National Health Service, was in 1965 2.

Compulsory licences

The Patents Act 1977 also provides that once three years have elapsed after the grant of a patent, a government department can apply to the comptroller of patents at the UK IPO for a licence under the patent to be granted to any person specified in the application (section 48(1)(c)). The grounds upon which such an application may be made are that: 3

  • demand in the UK for a patented product is not being met on reasonable terms;
  • by refusing to grant a licence to the patented invention on reasonable terms, the proprietor has:
    • prevented or hindered the exploitation in the UK of any other patented invention involving an important technical advance of considerable economic significance in relation to the patented invention;
    • unfairly prejudiced the establishment or development of commercial or industrial activities in the UK;
  • by imposing conditions on the grant of licences under the patent, or on the disposal or use of the patented product, or on the use of the patented process, the proprietor has unfairly prejudiced the manufacture, use or disposal of materials not protected by the patent, or the establishment or development of commercial or industrial activities in the UK (section 48A).

As with Crown Use, cases relating to compulsory licences have been few and far between in recent decades and the law remains relatively untested.

4. International obligations with respect to use of the subject matter of a patent: the TRIPS Agreement

The starting point when considering the UK's international obligations in terms of use of the subject matter of a patent without the authorization of the patentee, including use by a national government or third parties authorized by a national government, is Articles 31 and 31bis of TRIPS, with which the national legislation of WTO-member states must be compliant (subject to exemptions and waivers which apply for a transition period). Article 31 states that, subject to particular exceptions, unauthorised use (such as use via compulsory licensing and Crown Use) should only be permitted under national law where certain criteria are respected. These criteria include a requirement that any request for unauthorized use is considered on its individual merits, and that the proposed user must first make an effort to obtain a licence on reasonable commercial terms within a reasonable period of time. Further, Article 31 of TRIPS imposes particular conditions on the nature of the licence once granted, including that it must be non-exclusive, non-assignable, and limited in scope and duration according to the purpose for which it was granted. Pursuant to TRIPS, the patent owner will be entitled to adequate remuneration in relation to the licence 4.

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1 Patchett's Patent (No.2) [1967] F.S.R. 249 (1967)

2 Pfizer Corp v Ministry of Health [1965] A.C. 512

3 Different grounds will apply depending on whether or not the patentee is a national of, domiciled in or has a place of business in a World Trade Organisation country (and is, therefore, a "WTO proprietor"). In this section we consider the grounds applicable to WTO proprietors given that they will apply in the vast majority of cases.

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