Under the Shadow of a Pandemic: Fair Use in Patent Law

Lvxiao Chen is a J.D. candidate, 2021 at NYU School of Law.

As the COVID-19 pandemic sweeps through the world, many hard-hit countries, like the United States and Italy, are in dire need of ventilators to keep patients breathing. To address the shortage, companies that are not traditional medical device manufacturers are transforming their production lines to make ventilators and related components.

However, one obstacle stands between goodwill and an increase in production: the system that promotes innovation by granting exclusivity—patent law. Ventilators are made with intricate parts, many of which are protected by intellectual property law and guarded by medical device companies across the world. As a result, firms that fail to obtain licenses due to time or budget constraints under the ongoing global crisis are subject to patent infringement liability under 35 U.S.C. § 271. Although some patent holders, like Metronics, are sharing patents by granting a royalty-free, temporary permissive license for ventilator technologies to enable firms to enter the ventilator field and boost production, others might not share such generosity. In Italy, two engineers made patented ventilator valves using 3D-printing when medical device companies were unable to meet the surging demand. The medical device company turned down their request for design files, and stated that copying is illegal. Although the company later claimed that it never threatened to sue anyone, it is worth thinking how the current intellectual property law can be tailored to address the ongoing and future crisis in an efficient and equitable way.

One possible solution is introducing a fair-use exemption into patent law. A few scholars have argued for such a defense over the years, including Professor Katherine Strandburg and Professor Maureen A. O’Rourke. Many of their justifications remain sound today, and the need to balance the public interest and patent exclusivity continues to grow. Patent trolls are still prevalent today despite courts’ efforts to eliminate patent abuse. The research exception from Madey v. Duke remains narrow and vague. Technology advancement made it almost impossible for individual firms to develop all the components in one complex product, like phones and tablets, dragging companies like Apple into endless patent wars across the globe. Finally, the COVID-19 pandemic that no one ever contemplated is unveiling another market failure of our current patent system by scaring away manufacturers, slowing down productions of essential goods, and driving up prices for drugs that are potential cures.

Like its counterpart in the U.S copyright law, the proposed fair use exemption in patent law also intends to balance social welfare and the interest of holders of intellectual properties. 17 U.S.C. § 107 provides four factors for considering whether the in question work is a fair use of the copyrighted work. Some of these factors could be transformed into considerations in patent law.

The first factor, the purpose and the character of the use, examines whether the work is transformative enough to add something new to the original creation. This consideration can serve as an expansion of the existing research exemption, which only allows “amusement, to satisfy idle curiosity, or for strictly philosophical inquiry” and when the use of a patented compound is “reasonably related to the development and submission of information” to the FDA. A broader exception could incentivize individual inventors who might not have the resources to cover the transactional cost to experiment on patented products and processes. If an invention is deemed to have substantially improved or transformed the original creation, the inventor should be shielded from potential liability.

The fourth factor, effect upon work’s value, can also serve as a consideration for fair use in patent law. This factor measures whether the work could potentially harm the market of the original creation. When the patent holder is unable to satisfy the demand, the public interest is best served when other manufacturers enter the market. Under the current system, parties can negotiate licenses before they start manufacturing. However, some patent holders might refuse to give away licenses just to inhibit research and innovation of others. Also, during an imminent crisis, such negotiation can be time-consuming and costly, thus hindering manufacturers’ ability to satisfy the surging demand. In the case of a pandemic, a short delay might cost the lives of many individuals. Currently, if the federal government and its contractors infringe a patent, the patent holder can only recover for reasonable compensations. This is a form of a compulsory license that does not require the consent of the patent holder and can potentially be used to address emergency situations. However, this provision is rarely invoked and does not extend to private entities.

Other factors that are outside the copyright fair use framework should also be considered. For example, if the crisis is imminent and the infringer’s purpose is to serve the public interest, then the infringement is probably fair use. Further, if the infringement is not for profit and meets the factors above, it probably could fall under a fair use exception. On the other hand, if the infringement generates profit, then it would be equitable to demand reasonable compensation and to issue a compulsory license even if the work is transformative, serves enough public interest, or does not harm the market of the original invention.

In conclusion, if a fair use exemption is introduced into the patent law, the following factors should be considered:

1. Whether there is enough public interest at stake. The law could probably make a narrow exception for national or global emergencies, like the exception for pharmaceutical compounds discussed above. The exception should only apply for the duration of the crisis.
2. Whether the infringer, through research and experiment, made substantial change to the original invention.
3. Whether the infringement can potentially harm the patent holder’s market.
4. Whether the infringement is intended to generate profit.
   1. If the infringement does not generate profit, and meets factor 1, 2, or 3, then it should fall under the fair use exemption.
   2. If the infringement generates profit, and meets factor 1, 2, or 3, then the infringer should be granted a compulsory license and ordered to pay a reasonable compensation.

The exemption, if applied, will benefit independent inventors, scientists, and startups that might not have the time and resources to obtain all required licenses. During the ongoing COVID-19 pandemic, it would allow researchers and manufacturers to temporarily shift their focus to developing new medications and making medical devices without undergoing the long and costly process of obtaining a license, thus saving many lives.

Nevertheless, there are various difficulties in applying the test. The pandemic takes the argument for public interest to an extreme, but it is hard to imagine how it would apply in normal times. One possibility might be distributing low-priced drugs in low-income communities. The second factor, too, can be challenging to apply. Whether the product is making substantial improvement is a technical question, and courts are probably not well-equipped to make such judgement. Lastly, deciding whether the infringement is for-profit or not would require a lot of factual inquiries, and situations might change when a non-profit entity transforms into a for-profit one. Therefore, this article is merely a starting point for us to re-think how the patent system needs to be changed to adapt to the current reality. In the future, perhaps the law can be better tailored to balance public interests and the incentive to innovate.