[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
IP AND STRATEGIC COMPETITION WITH CHINA:
PART II_PRIORITIZING U.S. INNOVATION OVER
ASSISTING FOREIGN ADVERSARIES
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HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, INTELLECTUAL
PROPERTY, AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
TUESDAY, JUNE 6, 2023
__________
Serial No. 118-23
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: http://judiciary.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
52-561 WASHINGTON : 2023
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COMMITTEE ON THE JUDICIARY
JIM JORDAN, Ohio, Chair
DARRELL ISSA, California JERROLD NADLER, New York, Ranking
KEN BUCK, Colorado Member
MATT GAETZ, Florida ZOE LOFGREN, California
MIKE JOHNSON, Louisiana SHEILA JACKSON LEE, Texas
ANDY BIGGS, Arizona STEVE COHEN, Tennessee
TOM McCLINTOCK, California HENRY C. ``HANK'' JOHNSON, Jr.,
TOM TIFFANY, Wisconsin Georgia
THOMAS MASSIE, Kentucky ADAM SCHIFF, California
CHIP ROY, Texas ERIC SWALWELL, California
DAN BISHOP, North Carolina TED LIEU, California
VICTORIA SPARTZ, Indiana PRAMILA JAYAPAL, Washington
SCOTT FITZGERALD, Wisconsin J. LUIS CORREA, California
CLIFF BENTZ, Oregon MARY GAY SCANLON, Pennsylvania
BEN CLINE, Virginia JOE NEGUSE, Colorado
LANCE GOODEN, Texas LUCY McBATH, Georgia
JEFF VAN DREW, New Jersey MADELEINE DEAN, Pennsylvania
TROY NEHLS, Texas VERONICA ESCOBAR, Texas
BARRY MOORE, Alabama DEBORAH ROSS, North Carolina
KEVIN KILEY, California CORI BUSH, Missouri
HARRIET HAGEMAN, Wyoming GLENN IVEY, Maryland
NATHANIEL MORAN, Texas Vacancy
LAUREL LEE, Florida
WESLEY HUNT, Texas
RUSSELL FRY, South Carolina
------
SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND
THE INTERNET
DARRELL ISSA, California, Chair
THOMAS MASSIE, Kentucky HENRY C. ``HANK'' JOHNSON, Jr.,
SCOTT FITZGERALD, Wisconsin Georgia, Ranking Member
CLIFF BENTZ, Oregon TED LIEU, California
BEN CLINE, Virginia JOE NEGUSE, Colorado
LANCE GOODEN, Texas DEBORAH ROSS, North Carolina
KEVIN KILEY, California ADAM SCHIFF, California
NATHANIEL MORAN, Texas ZOE LOFGREN, California
LAUREL LEE, Florida MADELEINE DEAN, Pennsylvania
RUSSELL FRY, South Carolina GLENN IVEY, Maryland
CHRISTOPHER HIXON, Majority Staff Director
AMY RUTKIN, Minority Staff Director & Chief of Staff
C O N T E N T S
----------
Tuesday, June 6, 2023
Page
OPENING STATEMENTS
The Honorable Darrell Issa, Chair of the Subcommittee on Courts,
Intellectual Property, and the Internet from the State of
California..................................................... 1
The Honorable Henry C. ``Hank'' Johnson, Ranking Member of the
Subcommittee on Courts, Intellectual Property, and the Internet
from the State of Georgia...................................... 2
WITNESSES
Mark Sedam, Vice President, Technology Opportunities and
Ventures, NYU Langone Health
Oral Testimony................................................. 4
Prepared Testimony............................................. 7
The Honorable Dennis Shea, Executive Director, J. Ronald
Terwilliger Center for Housing Policy, Bipartisan Policy Center
Oral Testimony................................................. 12
Prepared Testimony............................................. 14
Marc Busch, Professor, Karl F. Landegger Professor of
International Business Diplomacy, Georgetown University
Oral Testimony................................................. 20
Prepared Testimony............................................. 22
Ed Gresser, Vice President and Director, Trade and Global
Markets, Progressive Policy Institute
Oral Testimony................................................. 27
Prepared Testimony............................................. 29
LETTERS, STATEMENTS, ETC. SUBMITTED FOR THE HEARING
All materials submitted by the Subcommittee on Courts,
Intellectual Property, and the Internet, for the record are
listed below................................................... 53
Materials submitted by the Honorable Darrell Issa, Chair of the
Subcommittee on Courts, Intellectual Property, and the Internet
from the State of California, for the record
Testimony of John Murphy, Chief Policy Officer Biotechnology
Innovation Organization
A letter to Ambassador Katherine Tai, United States Trade
Representative, May 4, 2021
A letter to Ambassador Katherine Tai, United States Trade
Representative, Nov. 10, 2022, submitted by the Honorable
Deborah Ross, a Member of the Subcommittee on Courts,
Intellectual Property, and the Internet from the State of North
Carolina, for the record
IP AND STRATEGIC COMPETITION WITH
CHINA: PART II--PRIORITIZING
U.S. INNOVATION OVER ASSISTING
FOREIGN ADVERSARIES
----------
Tuesday, June 6, 2023
House of Representatives
Subcommittee on Courts, Intellectual Property, and
the Internet
Committee on the Judiciary
Washington, DC
The Subcommittee met, pursuant to notice, at 10:05 a.m., in
Room 2141, Rayburn House Office Building, Hon. Darrell Issa
[Chair of the Subcommittee] presiding.
Present: Representatives Issa, Massie, Fitzgerald, Cline,
Kiley, Lee, Johnson, Lieu, Ross, Schiff, Dean, and Ivey.
Mr. Issa. The Subcommittee will come to order.
Without objection, the Chair is authorized to declare a
recess at any time.
We welcome everyone here today for a Hearing on
Intellectual Property and Strategic Competition with China. I
will now recognize myself for a brief opening statement.
We are here today because intellectual property protection
is vital. In fact, the United States is and remains a--or has
been and remains a leader in intellectual property, but also in
respect for intellectual property. In fact, second only to the
United Kingdom, we are the oldest country to incorporate
intellectual property in the underpinning of our law and, in
fact, in our Constitution.
The medical innovations and scientific rigor that developed
COVID-19 vaccines, for example, are no less an invention than
anything else that we would invent now or in the future. In
fact, those inventions find themselves at risk because of
Executive action under TRIPS by the President of the United
States.
In May 2020, the Trump Administration announced Operation
Warp Speed to provide billions in taxpayer dollars to companies
developing COVID-19 vaccines. Those companies, in many cases,
moved from other projects to doing this project to save lives
here and around the world. Unfortunately, during the COVID-19
pandemic, the WTO voted to permit member Nations, including the
People's Republic of China, to waive IP protections on COVID-19
vaccine technology, much of which was developed in the United
States and Europe, by our taxpayers.
The Biden Administration regrettably endorsed this action,
one that I believe goes to very core of that Constitutional
protection, not just the Constitutional protection of the right
to have works of art and inventions be protected but, in fact,
the taking of real property without compensation. This means
that, in fact, there are two Constitutional principles at risk
here.
The abuse, as I would frame it, came without reason,
though, and not one Nation has acted on the waiver. That's the
good news. The good news is that, in fact, there is no direct
damage as we speak today. We are speaking more about future
consideration of TRIPS waiver.
Arguably, we should be here today--arguably, we should be
here today to push for waivers of rescission on a bipartisan
basis before or unless China was to take advantage of their
opportunity and seize the technology in a nonrecoverable way.
As we know, it is irresistible for countries around the
world to buy at the lowest possible price medicines and other
products, and they do so without, per se, disrespect for
invention, but knowing that often intellectual property has not
been respected in the production of it.
This is why I'm proud to introduce No Free TRIPS Act today
with Senator Marsha Blackburn of Tennessee. The bill would
simply require any Presidential Administration to receive
congressional approval to waive targeted portions of the
agreement on trade relations aspects of intellectual property--
short reason we call it TRIPS--for all members of the World
Trade Organization.
This commonsense idea that the underlying body should have
to confer, and the body that can, in fact, appropriate funds to
compensate those who might have a taking, must be considered.
Presidents could do a great many things. They cannot
appropriate money to compensate for a taking of this magnitude.
Any expansion of the TRIPS waiver agreement will undermine
the very innovation, record-breaking rapid development that we
saw for COVID-19. For that reason, we are here today to talk
not just about the risk of helping China, but the very risk to
the innovation that we all enjoy here in the United States if
we do not speak strongly in favor of respect for intellectual
property.
With that, I'm pleased to yield back and introduce the
Subcommittee Ranking Member, Mr. Johnson.
Mr. Johnson of Georgia. Thank you, Mr. Chair, for holding
this hearing.
The U.S. intellectual property system is one of our crown
jewels and is essential to promoting innovation and driving
economic growth in this country. To ensure that our IP rights
are respected around the world, the U.S. has entered into the
World Trade Organization agreement on Trade-Related Aspects of
Intellectual Property Rights, or TRIPS.
The TRIPS agreement has successfully fostered protection of
IP for nearly three decades, and we should approach any
encroachment on these rights with caution. When extraordinary
circumstances exist, sometimes we must take extraordinary
measures.
The COVID-19 pandemic, which has taken the lives of nearly
seven million people to date and which continues to rage across
the globe, is one such extraordinary circumstance. That's why I
supported a limited waiver of the TRIPS Agreement to help
developing countries gain access to the lifesaving vaccines
that they need to protect their citizens.
Not only do we have a moral imperative to help those in
need, but we must also recognize that COVID-19 knows no
borders. We cannot protect Americans from this deadly virus if
we do not help other countries reduce the spread of the disease
in their midst.
I want to thank the Biden Administration for undertaking
the hard work of negotiating a narrow but important waiver
under difficult circumstances. I know that this was not a
decision that they undertook lightly, and I appreciate the
careful balance that they struck between respect for
intellectual property rights and the need to take extraordinary
measures to end a global health emergency.
I do not dismiss the concerns of those who oppose the TRIPS
waiver, particularly those who fear that the Chinese government
will take advantage of the waiver to access American technology
and to use this technology to compete with American companies.
We know that the Chinese government has a history of using
theft and strong-armed tactics to acquire foreign intellectual
property, which hurts our inventors' ability to compete and
succeed. While we should not allow these concerns to stand in
the way of protecting lives during a public health emergency,
we should also ensure that proper guardrails are in place so
that we do not facilitate placing our technology in the hands
of our foreign competitors.
As the Biden Administration considers whether to support a
proposal to expand the TRIPS waiver to include diagnostics and
therapeutics, I hope that they will keep these important
concerns in mind. I appreciate the careful and thoughtful
process that they are undergoing, including requesting a study
by the International Trade Commission, and I will reserve
judgment on an expansion until the ITC completes its work.
In the meantime, I appreciate the opportunity to hear from
our distinguished witnesses today, and I look forward to
hearing their thoughts on the important issues before us.
Thank you, Mr. Chair, and I yield back.
Mr. Issa. I thank the gentleman.
We will enter into the record the opening statements of the
Chair, Mr. Jordan; the Ranking Member, Mr. Nadler; and all
other members who wish to make an opening statement.
Without objection, those opening statements are placed in
the record.
Mr. Issa. We will now introduce the witnesses.
Mr. Marc Sedam is the Vice President of Technology
Opportunities and Ventures at NYU Health and New York
University. He has 30 years of experience as an inventor,
Biotech Chief Operating Officer, and in commercializing
intellectual property generated at universities. Prior to his
current position, he served as Vice Provost for innovation and
new ventures and Managing Director at UNH Innovations.
Next, we have Mr. Dennis Shea. Mr. Shea is the former
Deputy U.S. Trade Representative and U.S. Ambassador to the
World Trade Organization. At the WTO, he led an interagency
team charged with advancing U.S. interest on issues ranging
from trade in goods and services to e-commerce and, of course,
intellectual property protection, and agriculture. Mr. Shea
previously was a member of the U.S.-China Economic and Security
Review Commission and served as an interim Chair--as either the
Chair or Vice Chair of that commission between 2012-2017.
Next, we have Professor Marc Busch. Mr. Busch is the Karl
F. Landegger Professor--sorry about that--of International
Business Diplomacy at Georgetown University of Foreign Service.
He is also a global Fellow at the Wilson Center, and that
Institute for Strategic Competition, and previously taught at
Queen's University School of Business and Harvard University.
Mr. Edward Gresser is the Vice President for Trade and
Global Markets at the Progressive Policy Institute. He
previously served as Assistant U.S. Trade Representative for
Trade Policy and Economics during the Obama Administration. He
also is an adjunct Professor at Johns Hopkins University, where
he lectures on intellectual economic policy.
We want to welcome our witnesses. We're very pleased to
have a bipartisan distinguished group of intellectuals and
knowledgeable actors in this area, including the expertise in
trade and the WTO.
As is required by the Committee, would you please all rise
to take the oath. Usual raising of the right hand.
Do you solemnly swear or affirm under penalty of perjury
that the testimony you're about to give is the truth and
correct to the best of your knowledge, information, and belief,
so help you God?
Please be seated.
Let the record reflect that all witnesses answered in the
affirmative.
As you know from watching C-SPAN, your entire opening
statement will be placed in the record, so please limit
yourself to five minutes so that we can get to questions and
answers. I won't gavel somebody who's wrapping up, but, again,
20 minutes, 30 minutes, 40 minutes, no matter how long your
current opening statement, nor extraneous material you may
choose to add as a result of questions today, it will all be
included in the record. So, nothing will be left out.
Additionally, it is the Committee's desire that you agree
to take additional questions that may come from Members who are
unable to get here today or who served on the Full Committee
and are not here to ask questions.
Would all of you agree to do that?
Thank you for that free service. It is greatly appreciated,
because you'll find that our questions will lead to your
answers which will lead to other questions.
With that, we go in that order, starting with Mr. Sedam.
Now, the secret of turn on the mike and get very close to
it. Thank you.
STATEMENT OF MARC SEDAM
Mr. Sedam. Chair Issa, Ranking Member Johnson, and Members
of the Committee, thank you for having me today. I'm Marc
Sedam, former Chairperson of AUTM. I also serve as Vice
President for Technology Opportunities and Ventures at Langone
Health in NYU, although I do want to make clear I'm here under
my personal capacity.
So, I've been in the tech transfer business for almost 30
years as an inventor, as a startup COO, and as a university
leader, and have firsthand experience in what it takes to move
these nascent technologies into market. As you might be aware,
AUTM represents the tech transfer community across the Nation
and around the world. Over my career, I have worked with over a
hundred companies that are bringing new products and ideas to
market for the betterment of humanity.
By way of background, technology transfer refers to how
innovations are taken from the lab, evaluated for commercial
potential, and then developed by a patent or other IP rights to
be licensed to a company for future development and
commercialization. Ever since the Bayh-Dole Act was passed in
1980, universities and their partners have created over $1.3
trillion in economic benefit for the Nation, including
thousands of patents, hundreds of new drugs, and other new
technologies, and millions of jobs. It's also led to thousands
of startup companies, most of which stay in the region around
the university where they're formed. University tech transfer
is a key component to regional economies.
If there's one overriding principle, I've learned during my
time is that the patent is the key building block to
innovation. Without strong IP rights, inventors have little
chance of attracting the capital to develop that invention into
a useful drug, technology, or product. The startup company I
once ran, Qualyst, was able to operate successfully for over a
decade, employing 15 people with high-paying jobs, on the backs
of just a few patents and was sold in a successful exit.
Given the massive importance of patenting to innovation,
particularly for university research, it's easy to see why
universities, in general, are not supportive of TRIPS waiver
that was issued last year by the WTO. The pandemic presented
unprecedented challenges and laid bare inequities of access to
vaccine technology globally. The vaccines which were developed
in less than a year to fight COVID were the direct result of
patent-based research done before the pandemic and expanded on
to fight COVID. The problem with reaching worldwide populations
with vaccines has been about distribution and not intellectual
property.
Three of our Nation's leading higher education
associations, including AUTM, recently filed comments before
the ITC regarding a second proposal to expand the TRIPS waiver
beyond vaccines into therapeutics and diagnostics. In those
comments, we noted that since the approval of TRIPS waiver
nearly one year ago, not one country declared its intent to
take the waiver. The lack of use or intent to use TRIPS is a
strong indicator that a further expansion of the waiver for
diagnostics or therapeutics would yield a similar result.
Thanks to those strong patent rights we sit here in this room,
the pandemic declared over, without a single use of the TRIPS
waiver.
The waiver of TRIPS is troubling on other levels. If future
pandemics emerge, will the precedent of the WTO's action cause
less willingness by investors and pharma manufacturers to jump
in to solve the crisis? Let's be clear, the WTO is already
signaling that it may want to consider TRIPS waivers for other
technologies. Leaders have discussed whether clean energy might
be another appropriate use, agriculture. Where does it end?
Talk to early stage investors, as I do every day, and you'd
understand the less risk we can create around funding already
risky early technologies, the more likely those investors will
be to make those investments. It's a simple calculation.
Investors and university tech transfer leaders can handle known
risks: Technical risk and market risk. Those things we
understand. We can use our best judgment to figure out how to
protect them, commercialize them, and get them to reach market.
When you add uncertainty to a risky situation, you'll
stifle innovation, investment, and opportunity. Whether it's at
the Patent Office or the WTO, patent uncertainty is an
innovation killer. We simply must have a patent system both
here and around the world that provides inventors and investors
with the tools they need to move discoveries forward, with a
clear understanding of those rights, once secured, cannot be
arbitrarily taken away.
It's also why AUTM has raised serious concerns about
potential misuse of ``march-in provisions'' of the Bayh-Dole
Act. There is a process ongoing by the government to review
march-in, and we believe loosening those provisions beyond
limited exceptions in the original act could simply have a
similarly negative effect on the willingness of partners to
work with universities on any of the number of research
projects.
My take-home message is that we all want to see new
products and services developed to improve human health and
create economic growth. Adding headwinds to the process of
protecting and commercializing IP only increases the chances
that those early ideas die on the vine and never progress into
lifesaving opportunities.
Universities and medical research institutions have created
a significant number of drug discoveries in the past 30 years.
With the support of NIH and other agencies, our Nation has led
the world in high-impact science, leading to many of the drugs
Americans rely on every day. Actions like the TRIPS waiver put
that process at risk. The potential expansion of such decisions
to other technologies is simply wrong-headed.
Ultimately, we believe further waivers will simply mean
fewer discoveries, new drugs, or new solutions to global
problems in the future, and that it serves no one's best
interest. We urge the Subcommittee to share its views in
opposition to further expansion of the TRIPS waivers. I thank
you for your time today and look forward to any questions.
[The prepared statement of Mr. Sedam follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Issa. Thank you, Mr. Sedam.
Mr. Shea.
STATEMENT OF THE HON. DENNIS SHEA
Mr. Shea. Chair Issa, Ranking Member Johnson, and Members
of the Subcommittee, I appreciate the opportunity to appear
before you today. At the outset, let me emphasize I am speaking
solely in my personal capacity.
In my testimony, I will share some thoughts on last year's
decision at the WTO 12 Ministerial Conference waiving IP
protections provided by the TRIPS Agreement for COVID-19
vaccines, as well as the possible extension of the waiver to
COVID therapeutics and diagnostics.
The TRIPS Agreement requires WTO members to provide certain
minimum standards of IP protection. Over the years, these
protections have played an essential role in supporting
innovation and the development of lifesaving medicines,
diagnostics, and therapies. More recently, they have enabled
researchers to safely share technology and data across borders
in ways that help power the development of multiple COVID
vaccines in record time.
The TRIPS Agreement also provides for a limited set of
flexibilities under certain extraordinary circumstances,
including the use of a patent without authorization of the
patent holder, a practice commonly referred to as compulsory
licensing. Striking the careful balance between encouraging
voluntary agreements while allowing for the unauthorized use of
patents only in extraordinary circumstances was a result of the
hard work and skill of U.S. trade negotiators.
As we approach the first anniversary of the 12th
Ministerial Conference, we can now safely describe the TRIPS
waiver for COVID vaccines as a solution in search of a problem.
No compelling evidence has been put forward to show that IP
protections have hindered global access to these vaccines. On
the contrary, factors such as trade barriers and customs
bottlenecks, lack of storage capacity, last-mile distribution
challenges, and high levels of vaccine hesitancy have been the
primary impediments.
With billions of COVID-19 vaccine doses produced globally
since the pandemic's onset, it's clear that a lack of supply
was never the issue. By supporting the TRIPS waiver for
vaccines, the United States has helped set an unfortunate
precedent.
According to press reports, country eligibility was a major
point of contention during the negotiations leading up to the
Ministerial Decision. Chinese and U.S. negotiators ultimately
agreed on language designed to incorporate a binding commitment
made by China's representative at a May 10th WTO General
Council meeting that China would not seek a waiver. This
language appears in footnote 1 of the Ministerial Decision.
Footnote 1, in my judgment, regrettably endorses the notion
that China, the world's second largest economy and largest
trading Nation, is a developing country. During my tenure as
U.S. Ambassador to the WTO, changing the system in Geneva, in
which some of the world's largest and most sophisticated
economies, most notably China, can claim developing country
status as a right was one of our leading reform initiatives.
Footnote 1 also appears inconsistent with H.R. 1107, the
PRC Is Not a Developing Country Act, which recently passed the
House of Representatives by a unanimous vote. H.R. 1107 states
that, quote:
It should be the policy of the United States to oppose the
labeling or treatment of the PRC as a developing country in any
treaty or other international agreement to which the United
States is a party.
In addition, in light of China's well-documented
noncompliance with WTO rules, I do not believe that China will
feel the least bit bound by a statement made by one of its
officials at a WTO General Council meeting, which is indirectly
referenced and characterized as binding in a footnote to a WTO
Ministerial Decision.
I'm not suggesting that China will be seeking to avail
itself of the TRIPS waiver anytime soon, but Chinese industrial
and military actors will continue to feel no compunction about
engaging in IP theft and violating both the spirit and letter
of the TRIPS Agreement.
Another concern arises from the massive investments China
is making in the developing world. Chinese business
arrangements with developing countries might serve as an access
point for theft of COVID-related technologies if these
countries were to avail themselves of a TRIPS waiver.
Extending a TRIPS waiver to COVID-19 diagnostics and
therapeutics is now under consideration at the WTO. As was the
case for vaccines, there appears to be no shortage of COVID-19
treatments with supply far outstripping demand. In November,
Mexico and Switzerland highlighted this fact in a WTO
communication which pointed out that, quote, ``No shortage of
therapeutics exists, and that large part of innovators'
production capacity remain idle due to a lack of demand.''
Unfortunately, the adoption of COVID-19 TRIPS waiver might
have inspired calls to weaken IP protections in other areas.
The WTO Director General, who took an usually active role in
the lead-up to MC-12 to encourage the WTO membership to adopt a
waiver for COVID-19 vaccines, has indicated she would support a
similar waiver for climate change mitigation technologies. If
this issue gets traction in Geneva, we can expect India, a
leading proponent of an expansive COVID-19 waiver, to be in the
forefront of these efforts as well.
Each day the U.S. is engaged in a global competition for
technological leadership, maintaining a robust intellectual
property right system, both domestically and in our
international arrangements, is critical to nurturing our
Nation's innovators and winning this competition.
Thank you, Mr. Chair.
The prepared statement of the Hon. Shea follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Issa. Thank you, Mr. Shea.
Mr. Busch.
STATEMENT OF MARC BUSCH
Mr. Busch. Chair Issa, Ranking Member Johnson, and Members
of the Subcommittee, my name is Marc Busch, and I teach at the
School of Foreign Service at Georgetown University. It's a
pleasure to appear before you to discuss the TRIPS waiver and
its implications for both commerce and national security at
home and abroad. I applaud you for taking on this very
important topic.
Let me be succinct. The TRIPS waiver was a mistake.
Expanding it will make things worse. It won't help fight COVID,
but it will hurt U.S. innovation. It will contribute to other
countries realizing their industrial policy goals. Moreover, it
will potentially lead to the U.S. facing greater efforts, not
least on the part of China, at economic coercion.
The waiver also has two knock-on effects. As has already
been pointed out, there are pleas to expand the waiver to
things like clean tech, maybe even agricultural technologies,
et cetera. This is very disconcerting. A less known knock-on
effect is that, for some reason this year, in particular, the
USTR has taken a very soft line on compulsory licenses writ
large. This has nothing to do with the waiver and everything to
do with the fact that, for years, other countries have been
abusing compulsory licenses, and now the USTR in the 2023
Special 301 Report has gone silent. This cannot be.
As has already been pointed out, IP is the lifeblood of our
innovative economy. The data are remarkable. Sixty-five days
from sequencing the RNA of the virus to a vaccine. MRNA, 32-34
patent families pre-2019. In fact, for all vaccines, 83 percent
of the patents on which they are built preexist COVID.
Rather than celebrate IP as having turned the tide on
COVID, the members of the WTO rushed to embrace a false
narrative, peddled by India and South Africa, with not a shred
of evidence. They argued, moreover, that it wasn't their job to
come up with evidence that somehow IP was keeping jabs out of
arms. In fact, they said that it was on those who would
disagree with the waiver to prove otherwise.
The waiver works through compulsory licenses. As my
colleague just pointed out, it does two things. It takes away
the need to invoke them only under extraordinary circumstances,
and it removes the obligation to first engage with the patent
owner. This is the wrong step at exactly the wrong time. In a
world awash in voluntary licenses, most of which include
technology sharing arrangements, this doesn't make any sense.
The focus instead--because we all want responses to COVID--
should be on tariffs, taxes, fragile healthcare systems, and
the like. Even when COVID vaccines have been free, they have
not always found their way to patients. Keep in mind, in Congo,
they had to destroy 1.7 million vaccines because they had
expired. Nigeria, one million for exactly the same reason.
This fall, the WTO will look to the Biden Administration to
react to that U.S. ITC study to decide whether to expand the
waiver to diagnostics and therapeutics. Something to keep in
mind: We have no idea what either of those two categories
entail. It is hard to believe that we are here at this moment
with no definitions of either COVID-related diagnostics or
therapeutics.
Second, the China question. Will China avail itself of
whatever is negotiated? It said no to vaccines; it did not say
no to whatever came next.
China is on the ascent in biopharma. McKinsey estimates
that by 2028, it will be the leader in certain segments. It
also at the moment is a leader in monoclonal antibodies, has
the ability to ramp up at a very cheap cost on antibodies in
general, and is a leader in gene editing and synthetic biology.
India, also a big player in generics, undoubtedly with two
of the top five generics producers on Earth and the nickname
``the pharmacy to the world,'' will likely weigh in on and use
these waivers. If it doesn't use them, just the mere ability to
use will deter a lot of innovations and inventions from coming
to market.
We need to keep in mind that compulsory licenses have been
abused, are being abused, and there is nothing new about this
to make the burden less. Under the TRIPS waiver is the wrong
thing at the wrong time.
So, again, let me conclude by saying, the COVID waiver,
expanded or not, will not roll back COVID any more than it's
already been rolled back. It will not foster U.S. innovation.
It will help foreign countries realize their industrial policy
goals, and through economic coercion, it will hurt the national
security of this country.
Thank you.
[The prepared statement of Mr. Busch follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Issa. Thank you.
Mr. Gresser.
STATEMENT OF ED GRESSER
Mr. Gresser. Mr. Chair, Ranking Member Johnson, thank you
very much for soliciting our participation in this hearing.
You're posing some important questions. Specifically, how
does the WTO's TRIPS Agreement relate to U.S. interest in
innovation and technological progress? Was the Biden
Administration correct to support a temporary waiver of some of
its provisions for COVID-19 vaccines last year? Will this be to
the advantage of China vis-a-vis the United States? Should this
waiver go further to cover diagnostic and therapeutic
technologies?
Let me make four points to summarize my views here.
First, promotion of scientific research and defense of
American innovators against piracy and infringement are
important to American national interests, and the TRIPS
Agreement is an important element of policy to secure them.
American businesses, government labs, and research
universities commit over $700 billion a year to research and
development. The results make us a leader in fields ranging
from agriculture to medicine, aerospace, automotive industry,
information technology, and many other fields.
The TRIPS Agreement is a part of policy to secure these
results. It imposes reasonable obligations on the 164 WTO
members to maintain and enforce a basic set of patent,
copyright, trademark, and other laws, with flexibilities for
least developed countries in emergency situations, such as
those noted in the 2001 Declaration on TRIPS and Public Health.
Since TRIPS' entry into force, R&D has risen from 2.2
percent of GDP to 2.6 percent in high-income countries, from
0.5-1.5 in middle-income countries, and from 2.4-3.4 percent in
the U.S. specifically. Such figures suggest that the TRIPS
Agreement is contributing as its authors hoped.
Second, however, in emergency circumstances, governments
must often act in ways they would not in normal times,
frequently do so on the basis of incomplete information, and
take steps that should not be regarded as precedence to be
sustained later on.
The COVID-19 pandemic was such an emergency. As a wholly
new virus, easily transmissible, and in many cases deadly, both
the Trump and Biden Administrations, with good reason, took
emergency steps in many areas to address it. Often these helped
save lives and support the U.S. economy in crisis.
The COVID-19 TRIPS waiver should be seen in this context.
It is time limited for five years, it is limited in coverage to
vaccines only, and includes a formal binding commitment for
China to forego use of the waiver. This approach seems, to me,
to be a reasonable decision, given the information available to
the Biden Administration, the time, and was well negotiated by
Ambassador Pagan in Geneva and Ambassador Tai in Washington.
The fact that no country has yet used it suggests, in
retrospect, that the major challenges for distribution were
related to developing the ability to mass-produce vaccines and
distribute them safely rather than to intellectual property
rules. At the time, governments are acting with an emergency
situation in their minds, with thousands of deaths per day, and
I think had some reason to take extraordinary measures.
Looking ahead, where do we go from here? First, I would
note that the Chinese commitment to forego use of the waiver
means that all normal WTO patent rules remain in effect, vis-a-
vis China for COVID vaccine specifically, and for all other
patents as well. There is, as my colleagues have mentioned,
great reason to be concerned about Chinese efforts to access
and use proprietary American technologies and more generally to
take illicit advantage of U.S. research to promote the Chinese
economy. There is a large question and important one about how
do you effectively keep WTO patent, copyright, and other IP
rules effective in the case of China.
The TRIPS waiver for COVID vaccines is not one of these. It
is China's decision to forego it. It is a commitment as binding
as any other WTO IP rules. So, I think the administration
handled this quite well.
Looking ahead, the WTO members are now considering a
broader proposal to waive TRIPS rules for therapeutics and
diagnostics related to COVID. This appears to be a much broader
array of products and technologies than the vaccine waiver
covered. As several of my colleagues have mentioned, the scope
of the coverage is not yet clear. The U.S. International Trade
Commission is reviewing submissions on this matter and should
be issuing a report that adds more context in information in
mid-October. I await this with interest.
I would note, in general, however, that with a reported 64-
70 percent of the world's public vaccinated, the emergency
situation of the pandemic's first two or three years has
abated, and the case for emergency IP measures would need to be
made very forcefully. I do not think we are in the same
situation today as we were two years ago or even one year ago.
Thank you very much, and I look forward to your questions.
[The prepared statement of Mr. Gresser follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Issa. Thank you.
I now recognize the gentleman from Virginia, Mr. Cline, for
his questions.
Mr. Cline. Thank you, Mr. Chair. I thank our witnesses for
being here.
Ambassador Shea, let me start with a question about the
trustworthiness of the Chinese government. How would you rate
the trustworthiness of the Chinese government and Chinese
Communist Party with respect to IP rights, especially
considering the conduct that's been documented in the USTR
Section 301 Report in recent years?
Mr. Shea. I would say that their trustworthiness is nil.
Each year, the USTR issues an annual report on China's
compliance with its WTO obligations. The Biden Administration
put out a very strong report saying China's compliance is poor,
and goes through the litany of violations of subsidy
notifications and market access requirements. That's why I find
it so intriguing that we would rely on a footnote in a
Ministerial Decision that indirectly references a binding
commitment by an official at the WTO at the General Council. It
does not seem like a very powerful commitment to me.
Mr. Cline. What do you make of the Chinese government's
silence on whether they give similar assurances with respect to
an expansion of the waiver to therapeutics and diagnostics?
Mr. Shea. Well, I think there is a possibility that they
will seek that. I also think we should be passing--Senate
should take up the PRC Is Not a Developing Country Act. I know
it passed by
415-0 here in the House of Representatives.
As I read that footnote, it suggests--it treats China as a
developing country, even though it allegedly makes a binding
commitment not to seek a waiver. I think if we had that as a
policy of the United States, that we do not treat China as a
developing country in international agreements and
international organizations, that would really, I think, help
stall, or stall an effort for China to seek a waiver on other
matters.
Mr. Cline. Now, how would you compare the current debate at
the WTO as to special IP waivers for COVID-19 with the debate
around TRIPS flexibility for HIV/AIDS drugs from 20 years ago?
Mr. Shea. I wasn't really paying attention 20 years ago.
The issue when India and South Africa first circulated the
TRIPS waiver proposal, no one took it seriously. It happened as
sort of at the end of my term at the WTO, but it suddenly got
legs.
I mean, and I would say that South Africa and India are
also countries that, under a proposal we put forward at the WTO
on special and differential treatment, they would also be
covered because they're members of the G20. India's a huge,
huge, huge economy, so why are they not abiding by all the
rules of the WTO? Why do they have a right to automatically
claim special and deferential treatment?
Mr. Cline. Before the WTO's IP waiver for COVID-19 vaccine
patents was put into place, many noted that the TRIPS Agreement
already provided flexibilities for member Nations to implement
compulsory licenses for public health emergencies, but no
member Nation tried to use those flexibilities before the IP
waiver was adopted.
Do you think that the IP waiver was needed, considering
existing TRIPS flexibilities?
Mr. Shea. No, it was certainly not needed.
Mr. Cline. What are the differences between the IP waiver
and the TRIPS flexibilities available before the waiver?
Mr. Shea. Well, under TRIPS, as I think Professor Busch
said in his testimony, there has to be an effort to engage the
patent holder before you exercise a compulsory license. It has
to be under extraordinary circumstances. You can't re-export--
export the vaccine.
So, it expanded--there is also--there's a compulsory
licensing regime in TRIPS. What the TRIPS decision did was
expand this already reasonable system to allow the use of
compulsory licenses in extraordinary circumstances.
Mr. Cline. Professor Busch, you noted that the notice
requirement was exactly the wrong requirement at the wrong
time. Can you elaborate on that?
Mr. Busch. The idea that there wouldn't have to be a
discussion with the patent holder is not only wrong for
innovation, but obviously wrong for the generic provider which,
under voluntary licenses, is typically getting a tech-sharing
arrangement. So, it really doesn't make a lot of sense, even if
you believe that IP is the link. The problem is that there is
no evidence that IP is the link.
Now, let's not correlate two things here. Everyone wants
cheaper drugs. Compulsory licenses don't necessarily do that.
So, this is, as my colleagues said, ``a solution looking for a
problem.'' We actually have evidence that compulsory licensing
doesn't come close to certain voluntary licensing prices. So,
there's no magic here. It's not necessarily the case that a
compulsory license eases the burden in terms of price. As I
pointed out, even when these drugs had been made available for
free, that has not led to more jabs in arms.
Mr. Cline. Thank you.
Mr. Issa. I thank the gentleman.
We now recognize the Ranking Member, the gentleman from
Georgia, Mr. Johnson, for his questions.
Mr. Johnson of Georgia. Thank you.
Mr. Gresser, you respond to the insinuation that the Biden
Administration was in error in supporting a temporary waiver of
patent rules. Based on the fact that the administration was an
incoming administration confronted with a grave public health
emergency that threatened health and safety of people, and it
actually was killing people, can you go into a little more
detail on why you think that it was a correct decision to
support that temporary waiver of patent rules? I would like for
you to also respond to the question of whether you believe
therapeutics and diagnostics should now be subject to a
temporary waiver.
Mr. Gresser. Thank you. With respect to the Biden
Administration's choices in 2021 and early 2022, we need to
dial back the clock a bit. Over the course of 2020, year 2020,
the world fell into a massive health and economic crisis. As we
recall, the former administration closed a lot of the U.S.
economy. So did many State governments. We went through a
period of offering PPP loans on a scale of tens of billions of
dollars. We did lots of things that we would not do in normal
circumstances and would not be appropriate in normal
circumstances.
In normal circumstances, the TRIPS Agreement, as I had
mentioned, is serving the U.S. very well, and I believe is
serving the world interest in promoting research and
innovation.
There have been cases over time. Mr. Cline mentioned HIV
and AIDS, which was actually quite a similar debate at the WTO
15 or 20 years ago, whose early years I witnessed while I was
at the USTR at that time. It raises a question, when you have
an extraordinary threat to public health, is it at sometimes
necessary to make exceptions to policies you would ordinarily
not make exceptions to? Sometimes it is.
In the case of COVID, government, in 2020-2022, was
operating on not complete information. We don't know how many
new strains will evolve, how quickly they will come, how
virulent they will be. I think governments do need to at some
time take extraordinary measures. The Biden Administration
viewed that this might be one. In practice, no one has used it,
as you say. So, it's probably, in case in retrospect, maybe it
wasn't needed, hasn't done any particular harm, can move on.
With respect to therapeutics and diagnostics, this appears
to me to be much wider array of products and technologies than
the COVID way--the vaccine waiver, which is specifically for
vaccines for the COVID-19 virus. That gives me pause.
It, also, should be recognized that we are no longer in the
emergency situation of 2020-2021, so the external circumstances
are different. So, I'm personally quite skeptical that this is
necessary. I am waiting with some interest to see the ITC's
report and what they will show. I think from what I can see
right now, the case for a much broader waiver is not, at the
moment, compelling to me.
Mr. Johnson of Georgia. Thank you. In your testimony, you
say that the fact that China has foregone the use of the waiver
means that, to the extent there's reason for concern about
patent rights to COVID vaccine's vis-a-vis China, the relevant
issue is one of enforcing current legal rules rather than of
opening a gap in those rules for China. Can you expand on that
point and describe what you mean?
Mr. Gresser. Yes, that's correct. The WTO TRIPS Agreement
requires all its members, with some flexibilities for these
developed countries, to maintain a basic set of patent rules
and patent laws and enforcement. China has these patent laws.
China is a spotty enforcer. China is also an aggressive seeker-
out of proprietary technologies.
The COVID vaccine waiver does not change the WTO rules vis-
a-vis China, because China has foregone it. It is embodied in a
WTO document. So, it is an obligation of China just as the
regular patent laws are. So, what our challenge is in dealing
with China vis-a-vis patent laws is to find ways to enforce the
WTO rules to the extent we can; to have U.S. businesses adopt
best practices to defend themselves; to help the U.S.
Government--have the U.S. Government be an advocate and
enforcer of these rules.
Mr. Johnson of Georgia. Thank you. I yield back.
Mr. Issa. We now go to the only gentleman on the dais who a
TRIPS waiver could affect his current patents, Mr. Massie, the
gentleman from Kentucky.
Mr. Massie. I thank the Chair.
Mr. Shea, when I first heard the Biden Administration
announce they were going suspend patents for vaccines, I was
very taken aback, because it's a right that's enshrined in the
Constitution. I've learned it's a little more complicated than
that. It's not that he announced he would suspend patent
protection in the United States to make users sell something
here in the United States; he suspended something called TRIPS.
Can you explain to me what it is that was suspended that
never got used, but it is a reciprocal enforcement mechanism?
Is that what TRIPS is? Or is it reciprocal licensing
agreements? What is TRIPS?
Mr. Shea. TRIPS was adopted in 1995 or went into force in
1995 at the time of the creation of the World Trade
Organization. It, as Mr. Gresser said, it establishes a min--it
requires WTO members with certain flexibilities for LDCs, least
developed countries, and at one point for developing countries,
to use their domestic mechanisms to establish a minimum set of
intellectual property protections for patents, trademarks,
trade secrets, and other matters.
In TRIPS, there is a mechanism to obtain a compulsory
license in extraordinary circumstances. Even to get a
compulsory license, you have to engage the patent holder and
potentially remunerate the patent holder. The TRIPS
flexibility--the waiver of that requirement, which is what the
Ministerial Decision of the WTO decided, waives that
requirement.
So, an entity in WTO, a member country, can just utilize
the patent without informing the patent holder or even without
any kind of engagement with the patent holder.
Mr. Massie. Mr. Busch, when I first learned about this
TRIPS thing where you can get compulsory licenses, I'm just
troubled by TRIPS itself, now that I know about this, because
isn't this the logical conclusion of compulsory licenses, when
instead of letting a free market decide what the price of a
license should be, you let politicians decide what the price of
a license should be? Isn't the logical conclusion that people
who don't appreciate entrepreneurship are going to set the
value at zero of a patent?
Mr. Busch. The compulsory licenses are generally coming in
with a royalty fee of between 5-7 percent. So, it's not quite
zero, but it's not fantastic.
The AIDS experience really drove successive decisions on
what's known as TRIPS Article 31b. That was the flexibility
that allowed the members of the WTO to respond to a public
health emergency. The provisions there were centered on
compulsory licensing, the expectation being that when times get
tough, you could have generics providers, courtesy of their
government, force a patent holder to hand over their idea at a
royalty fee.
We really didn't see it during AIDS, and we aren't going to
see it now. Even if it's never used, however, in expectation,
the fact that we had 164 countries go along with the idea is
going to devalue IP and seriously raise questions about how
much protection is out there when things look tough. So that
really is what has to be worked out.
Exceptions should always be narrowly construed and rarely
used. We have to make sure that goes for not just the Part 1 of
the TRIPS waiver, but whatever might come with a Part 2, if
anything at all.
Mr. Massie. It sounds like eminent domain for property
rights, but for patent rights. In this case with the waiver,
the Biden Administration said just take it, just take what you
want here from these people who've developed it.
Mr. Sedam, there's been a claim that there was no harm in
this waiver since it didn't get used. Can you explain why there
is harm and what the message that it sends to inventors and
investors that we can just take your idea and give it away? Why
is that harmful, even though it wasn't implemented.
Mr. Sedam. Yes, I think there was no direct harm in that it
wasn't used. What it adds, as I mentioned in my opening
statement, was it adds uncertainty. Anytime there's uncertainty
in a transaction, the likelihood of a transaction goes down.
So, just the threat of having someone at a time ill-defined in
the future for an event that itself is ill-defined might mean
that somebody can come in and take and use your IP without
reasonable compensation for you, would lead people to say,
well, maybe I just simply won't make this investment.
In the area of a therapeutic, it might take $1.2-1.3
billion of investment to create a drug to have in the first
place that then someone can say, well, never mind, I'm just
going to use those IP rights and make it and not pay you
anything. So, who on Earth would invest that kind of money if
they knew that they couldn't get the return that they need even
just to break even later on?
So, it's a cooling effect and a headwind on even early
stage research and directing things toward really, really hard
problems that are going to be there in 5-10 years.
Mr. Massie. Thank you, Mr. Chair. My time has expired, and
I yield back.
Mr. Issa. I thank the gentleman.
We now go to the gentleman from Maryland, Mr. Ivey, for
five minutes.
Mr. Ivey. Thank you, Mr. Chair.
Good morning to the panel.
Ambassador Shea, in particular, good to see you again.
Mr. Shea. Hey, Glenn, how are you? May I call you Glenn?
Mr. Ivey. You may. I'm going to call you Ambassador,
though, sir.
Let me ask this question. Let's start with Mr. Gresser. In
your testimony, you talk about China foregoing the use of the
waiver. Give me your thoughts as to why that might be. Why do
you think that they didn't use the waiver in this instance?
Mr. Gresser. It's not easy for me to enter the mind of
Chinese negotiators and their overseers in Beijing, but I think
they may have felt (1) that they were very committed to their
own vaccine, Sinovac. They had put a lot of money and a lot of
kind of publicity into it and may not have been that interested
in the U.S. and European vaccines. (2) Another is that they may
well have seen that the scale of vaccine production in the West
was ramping up very quickly and that there would not likely be
a worldwide shortage as they would need to see their own needs
to use a waiver. (3) It may also be that they had their own
plans to go into the U.S. technology waiver or not.
All those things I think are possible, and there may be
more than one of them at work.
Mr. Ivey. Going to Mr. Sedam's point about whether there
was direct harm or not, what's your sense with respect to that?
Mr. Gresser. I don't want to characterize Mr. Sedam, but I
think he agreed that there was not direct harm to research. It
has always been the case within the WTO's TRIPS Agreement,
there are flexibilities. Ever since 2001, there has been an
explicit statement that governments have the right to take
action in event of public health emergencies. That is
understood. It has not been frequently used.
I think most people will say that the COVID-19 pandemic was
such an emergency. I think they will look at the fact that
governments have not actually used this and probably conclude,
yes, there is some risk there may be another such event in the
future, but that governments are pretty careful about how they
do it, and they don't recklessly and willy nilly take
intellectual property.
So, on balance, you can look at this experience to say this
was fairly reasonable. They took a prudential decision in an
emergency, found it wasn't necessary to use it, and no one has
used it. So, I think that should give some confidence to R&D
investors.
Mr. Ivey. Professor Busch, in your testimony just a moment
ago, you said, ``exceptions should be narrowly construed and
rarely used.'' Is it your sense--I would assume that you'd
think COVID would be within the range of the narrow exception
scenario?
Mr. Busch. I definitely agree with Mr. Gresser that there
was a lot that was unique about that dire moment in COVID in
the early goings. The question that I have, though, is--let's
just take that as given--why are compulsory licenses the
answer? We all agree that we want access to medicines. We all
agree that we would like cheaper drugs. Compulsory licensing is
a very particular mechanism. There is absolutely no evidence
that this particular mechanism is the solution to that problem.
That's where things get complicated.
So, on its face, I totally agree COVID was very unique in
many exceptional ways. That doesn't mean that what we do is we
run with this very cogent narrative and ignore all the factors
that are weighing on access to medicines, including the fact,
mind you, that there are 20 developing countries with no WTO
legal limit on their tariffs on pharmaceutical drugs. That is
simply unacceptable.
There are quick fixes for this, including zeroing out those
tariffs in these same extraordinary times and zeroing out the
taxes in these same extraordinary times. There are other
alternatives. This idea of a compulsory license is not a unique
equilibrium.
Mr. Ivey. Let me ask you about the--I think you gave a
valuation in response to Congressman Massie's question of 5-7
percent.
Mr. Busch. Yes.
Mr. Ivey. I don't mean to characterize your testimony, but
I sense that there was a sense of regret with the numbers that
you gave. I assume you think that was too low?
Mr. Busch. That's what Indian courts have been issuing, 5-7
percent royalty fees on compulsory licensing. I would imagine
that the technologies are sufficiently heterogeneous that it's
hard to pinpoint an exact number that would work across the
board. I can tell you that there has been no love for these
numbers on the part of those who have been essentially
expropriated.
Mr. Ivey. I see my time has expired, but I look forward to
another round. I appreciate your testimony.
Mr. Issa. I thank the gentleman.
That last question, I'm sure we're going to have a followup
on while we're here.
We now go to the gentleman from California, Mr. Kiley.
Mr. Kiley. Thank you, Mr. Chair.
As a quick survey, Mr. Sedam, do you believe that the
COVID-19 pandemic is over?
Mr. Sedam. It was declared over, so--and we're in this room
without a mask, so pretty good.
Mr. Kiley. That's right.
Mr. Shea, do you believe the COVID-19 pandemic is over?
Mr. Shea. I think so.
Mr. Kiley. Mr. Busch?
Mr. Busch. Yes.
Mr. Kiley. Mr. Gresser?
Mr. Gresser. I have to say honestly no. I had myself
contracted COVID last week. So, COVID is still with us.
Mr. Kiley. As a public health emergency, would you say it's
over?
Mr. Gresser. Yes. As a serious threat to life and health
around the world on a large scale, yes.
Mr. Kiley. All right. So, we'll count you as four for four.
The House of Representatives has passed a bill saying the
pandemic is over. The Senate has passed a bill. The President
signed it into law. Our experts here agree. So, why in the
world would we be continuing and expanding a waiver that is
predicated on the existence of a public health emergency? How
does that make any sense?
Professor Busch, how does that make any sense?
Mr. Busch. It doesn't.
Mr. Kiley. So, I think that in your testimony, actually in
several people's testimony, Mr. Shea, we heard about how this
proposal to expand the waiver would benefit China primarily.
Could you just explain again why that's the case?
Mr. Shea. Well, I'm concerned that they might be--China
might use countries that do use a waiver. The waiver extends
for five years, so we have been at it for one year. China might
be able to use other countries who avail themselves as a waiver
as a point of access for stealing technologies.
I mean, the Chinese have identified medicines and medical
devices as a key industry and made in China 2025. Biotechnology
is named as a key industry, and it's one of their former plans
called the Strategic Emerging Industry Plan. They're also
investing outward.
Particularly, I put in my testimony a report put out by a
U.N. agency, as well as a joint report by the China Chamber of
Commerce for Medicines, about how Africa might be a potentially
beneficial place for China to make significant pharmaceutical
investments. One of the things that is appealing is that many
of the countries there avail themselves of TRIPS flexibilities.
Mr. Kiley. Thank you. So, this is now concerning to me, and
it seems to be part of a pattern when we discussed at a prior
hearing of the Subcommittee that the Chair convened how this
administration entered the China Initiative. So, now we have
several examples of administration policies with respect to IP
that are potentially disadvantaging the United States vis-a-vis
China.
We've also seen talk from the WTO about potentially
expanding this sort of emergency waiver to other types of
emergencies, such as even green technologies.
Mr. Sedam, do you see any limiting principles to this idea
once we get in the habit of simply suspending IP if there's
something that anyone could characterize as an emergency?
Mr. Sedam. I think we have strong IP rights for a reason,
and we should respect them.
Mr. Kiley. Thank you.
A final point, several people have mentioned how the real
holdup was not IP protections when it came to global
distribution of vaccines. For evidence that I think you can
actually look right here in the United States where we had the
same level of IP protection, but different States had a very
different level of efficacy in terms of distribution.
I will say in my own State of California, our State was
dead last in the entire country out of all 50 States in terms
of how effectively it was able to distribute vaccines. The
irony is we had a Governor who decided it was good politics to
mandate vaccines left and right. He would get in front of the
camera every day and announce new vaccine mandates, even did
one--the only one in country for school children. Yet, when it
came to getting vaccines to people who wanted them, we were the
worst in the entire country because of a lack of administrative
capability and effective governance.
So, I think that in preparation for future public health
threats, States who didn't do well, like California, would do
well to study the methods of States that did do well and that
applies on an international level as well to those countries
that had a difficult time getting medicines to their citizens.
That's something that perhaps our international organizations
should be focused on as well. Frankly, I think this idea of
continuing these waivers and expanding these waivers is a
destruction to that.
So, thank you. I thank the Chair for convening this hearing
and I yield back.
Mr. Issa. Thank you.
We now go to the gentlelady from North Carolina for a round
of questioning.
Ms. Ross. Thank you, Mr. Chair. Thank you to all the
witnesses for your input.
I want to use my time today to turn down the temperature,
maybe depoliticize this issue a little bit and make it clear
that the Biden Administration has not taken a stance on whether
to expand the TRIPS waivers to COVID-19 diagnostics and
therapeutics. By all accounts, the administration is diligently
gathering information from all sorts of stakeholders about the
benefits and harms of a potential expansion.
Moreover, many Congressional Democrats, including myself,
have urged the Biden Administration not to expand the TRIPS
waiver. Last year, I joined over a dozen of my Democratic
colleagues in sending a letter to U.S. Trade Representative,
Ambassador Tai, expressing concerns with a TRIPS waiver
expansion for COVID-related therapeutics and diagnostics.
Mr. Chair, I'd like to submit that letter into the record.
Mr. Issa. Without objection, so ordered.
Ms. Ross. Thank you, Mr. Chair.
This issue is not theoretical to me or to my constituents.
Many of the companies that brought us lifesaving vaccines,
therapeutics and diagnostics during the public health emergency
are located in my district in North Carolina's Research
Triangle Park. These companies largely choose to enter into
voluntary licensing agreements with countries struggling with
the COVID-19 vaccine, diagnostics, and therapeutic supply.
Because they recognize that they had a duty to help other
Nations address the pandemic for all our benefit.
Strong IP protections are the backbone of my district and
the lifeblood of research and development. I've seen this in
labs, universities, and other pharmaceuticals--other facilities
in the biopharmaceutical space. Now, the Biden Administration
and the WHO have ended the COVID-19 public health emergencies.
People worldwide have access to U.S.-developed vaccines,
diagnostics, and therapeutics.
The best way we can support our national public health
infrastructure for the future is to make sure that we maintain
robust incentives to innovate, and that starts with strong IP
protections.
My first question is for all the witnesses so it may take
up all the time. American medical innovation led the way during
the COVID-19 pandemic as major vaccines and treatments were
developed in our country. What IP and trade policies are needed
for the United States to remain a leader in the
biopharmaceutical innovation space and in research and into--
and encourage making therapeutics and vaccines for emerging
viruses to ensure that we are prepared for the next pandemic,
which is surely coming and that we're not reliant on foreign
competitors like China. I'd like to start with Mr. Gresser and
then we can go down the line.
Mr. Gresser. Thank you very much. I think your statements
very well expressed.
In terms of where do we go from here? I think recognition
that emergency actions are sometimes necessary in emergencies,
but that they should be limited to emergencies is one
principle. The U.S. should feel very good about its support and
endorsement of TRIPS agreement over the years and should
continue on that path. We should be careful about expanding a
waiver that was designed specifically for vaccines and time
limited and limited in country coverage. More generally, I
think the U.S. is well set up to succeed. We have a large
industry and university research system. We have a lot of
public commitment to R&D. We have a strong ability to recruit
the world's talents. I think we should be feeling pretty good
about ourselves.
Ms. Ross. Mr. Busch.
Mr. Busch. We have to keep trade open. During the pandemic
and through the early goings of early 2022, 91 countries
opposed 191 export bans on COVID-related technologies. There
were only two countries that bucked the trend, Singapore and
New Zealand. They signed an agreement that they would keep
their supply chains in medical technologies open. We have to
stop thinking in this country that we can reshore every supply
chain. It can't happen, but to get the maximum benefits of
trade, we've got to agree with other countries to keep the
lines flowing.
Mr. Shea. Well, Congressman, I agree with your statement
completely, very well stated. I may disagree a little bit with
Professor Busch. I served on the U.S.-China Commission for 11
years. Last year, the Commission issued a report that has a
section on how the U.S. is dangerously dependent on China for
the manufacture of lifesaving medicines and advanced
pharmaceutical ingredients. So, I do think we need to bring
more of that production to the United States and to friendly
Nations.
Ms. Ross. Thank you. Sorry, it's up to the Chair whether we
can have the last witness answer.
Mr. Issa. Go ahead, briefly.
Mr. Sedam. I will.
I'll keep it even a little earlier stage, which is to
double-down and enforce the things that we have on the books
now, like protecting Bayh-Doyle and making sure we're
reinforcing Bayh-Doyle, so that their marching provisions are
only used very, very--it's never been used and to keep that
very limited. To look at things in our own Patent Office like
post grant review that has made it actually a little
problematic. It used to be patents were assumed granted--they
were valid when they were granted, post grant review has led to
some questions there. I would say even a little bit in our own
country, there's a principle in the technology industry called
efficient infringement, which is, I'll use your patents until
you sue me and then come back to that. We are actually
admitting that we are not respecting our own patent rights.
So, I would like to see the country think about doubling
down on those things and reinforcing for patent holders that
the rights that you have once granted cannot be taken away or
my used by somebody who does not own them.
Ms. Ross. Thank you for your indulgence, Mr. Chair. I yield
back.
Mr. Issa. Always.
The gentlelady from Florida who has been patiently waiting
is recognized.
Ms. Lee. Thank you, Mr. Chair. Good morning, gentlemen and
welcome.
Professor Busch, I would like to start with you. I could
direct your attention to the part of your testimony that
specifically refers to the expansion of these waivers and the
implication on national security. If you would please,
elaborate on how it is you perceive that these waivers could
lead to China's work at undermining the United States'
competitiveness and how that affects our overall national
security?
Mr. Busch. The flow of technologies with undermine U.S.
competitiveness, but on the national security front, think
about it this way, in the past few years all since COVID China
has waged political trade wars on Australia, Canada, Lithuania,
and the company Micron Technologies. In pursuit of levers in
these trade spats, the idea of having a market concentration in
any given technology will facilitate that type of economic
coercion. It's not new, but it's really come online in a really
big way.
I'd point out that both the FBI and Britain's MI-5 have
concluded that this is already happening, and that as a result,
you have the European Union recently legislating what they call
an anti-coercion instrument.
These are tough times in a lot of ways. The more that China
dominates certain of these sectors of Biopharma, the more
leverage they will have through economic coercion, which
implicates, of course, U.S. national security.
Ms. Lee. If you would elaborate for us on what are some of
the strategies you think the United States should be
implementing to help combat this effort and economic coercion
here at home?
Mr. Busch. Well, first, we have to do something that kind
of looks like what Europe has been up to, namely, thinking
about ways to mitigate those disputes that are purely political
and have nothing to do with economics. So, for example, Canada
arrested a relative of a Huawei senior executive, and China
banned canola exports from a given Canadian company in
response.
Australia asked for a global study of the origins of COVID,
and China went to a full-fledged trade war with Australia. We
have to have mechanisms that allow us to respond to these
coercion efforts and do so in a way that is transparent in the
eyes of our allies, because the worst thing in the world would
be to lose the faith of our allies as we deal with Chinese
aggression.
Ms. Lee. Thank you.
Ambassador Shea, I'd like to turn back to a point that you
raised earlier related to the potential scope of these waivers,
if expanded. You touched on the notion that these waivers could
implicate more than just COVID-related technologies or
therapeutics, but could actually implicate a broader
philosophical construct that covers things like climate change
mitigation and other technology. Share with us more your
perspective on that subject.
Mr. Shea. Well thank you for the question. Included in my
written testimony, a reference to existing--a statement by the
existing WTO Director General, who took a very active role in
pushing the waiver through the ministerial. Usually, the WTO is
considered a member-driven organization, but I think in this
instance around the waiver she seemed to have played a very
active role in shaping the outcome. When she was asked in
London recently about extending the waiver to climate change
mitigation technologies, according to the report I read, she
says, ``I could not agree more.'' We're going to see more of
this type of argument, and I hope we'll find a way because,
really, trade needs to help spread green technologies.
So, there are members of the WTO, for example, India who
would love to jump on that bandwagon. So, it is a slippery
slope, which unfortunately this precedent with the COVID-19
vaccine's waiver has set.
Ms. Lee. You touched a moment ago on the concept of our
dependence on China as it relates to lifesaving drugs. Tell us,
if you will, about that dependence and what steps you think we
could be taking now to try to mitigate that vulnerability?
Mr. Shea. Well, I think we need to--I don't know if the
Federal government, the Executive Branch has actually done an
assessment of what you are our dependencies are. I think the
first thing to do, not just on pharmaceuticals, but in other
areas, is to assess what are we really dependent on? What is
critical to us and what are our dependencies?
In the military, the military has subcomponents, thousands
of subcomponents in very high-tech missile systems, and I don't
think we know where all these subcomponents are sourced. I
assume some are from China, so that is very perturbing.
If I may, I'll just go back to--if I may on the question
you asked my colleague, I mean, you could have also added
Philippines, Korea, and Japan to the countries that have been
subject to Chinese trade coercion as a result of a political
position that they've taken.
In terms of working with our allies, there is an idea that
two people I respect, Rob Atkinson of ITIF and Clyde Prestowitz
have floated of forming a, defense--I forget what specifically
refers to, what the acronym refers to, but it is basically
getting allies together to collectively respond to coercive
trade acts directed at one of the members. So, I think that's
something that should be explored further.
Ms. Lee. Thank you.
Mr. Chair, I yield back.
Mr. Issa. I thank the gentlelady.
We now go to the gentleman from California, Mr. Lieu.
Mr. Lieu. Thank you, Chair. Let me first thank Chair Issa
and Ranking Member Johnson for holding this hearing. I have
some questions for Mr. Gresser, and I thank all the witnesses
for being here today.
So, the only reason we're here today talking about
intellectual property waivers for COVID vaccines is because
these vaccines work. Isn't that right?
Mr. Gresser. I think that's a fair statement.
Mr. Lieu. In fact, if these vaccines didn't work no one
would care about intellectual property. Isn't that right?
Mr. Gresser. They may be interested in how the U.S.
businesses do their research, there may be things that could
draw from unsuccessful approaches, but I think basically yes.
Mr. Lieu. The reason that all these witnesses are about
fear of China trying to take those intellectual properties
because these COVID-19 vaccines, in fact, reduce severe
symptoms in people who got vaccinated, or prevented death.
Isn't that right?
Mr. Gresser. Yes. China has a well-documented record of
trying to take and understand and sometimes--and make use of
proprietary U.S. technologies.
Mr. Lieu. So, for folks who are watching, and you're still
not vaccinated, I urge you to talk to your doctor about
vaccines or read what doctors' organizations like the American
Medical Association have said about vaccines.
Now, I do have a question about some of the things you said
in your written statement which I read. I haven't formed a very
strong opinion on these TRIPS waivers, so I just want to learn
some more information. There is a huge difference between
getting a patent and then producing a vaccine. There are
multiple steps. You have to have the resources to be able to do
that.
Mr. Gresser. Yes. A patent is a legal proprietary right to
produce a particular product.
Mr. Lieu. So, I'm just trying to understand, even if a
devolving country got a patent for one of these complicated
vaccines, how are they going to be able to produce that?
Mr. Gresser. It would depend on the country, I'm sure.
There are quite sophisticated scientific and medical
establishments in India and in Brazil, quite a number of
countries. Not all WTO members would have that capacity.
Mr. Lieu. Doesn't it suggest, though, that, in fact, one of
the reasons no one took the TRIPS waiver is because they didn't
really have the capacity to make one these vaccines?
Mr. Gresser. I don't think that would be the case. I think
the reason that countries have not used it is because the
steps, the U.S. and others took to produce new vaccines,
develop ways of manufacturing them on massive scale, and
logistically, deliver them to people in need proved quite
effective. So, there was actually little need for countries to
use the waivers.
Mr. Lieu. So, it turned out that there were some countries
that have enough capacity to supply these vaccines.
Mr. Gresser. Eventually, yes. I don't think that was known
early on. That was one of the gaps in information that all
governments were working with.
Mr. Lieu. Right. For a developing country to take the
resources and just all of a sudden create a factory to start
making these complicated vaccines would have taken quite a big
amount of time, right?
Mr. Gresser. For some of them, yes, and maybe for many of
them.
Mr. Lieu. So, I'm just trying to understand, what is the
utility of giving away these patents to countries that haven't
really shown the ability to just stand up a factory--personnel
and then develop--and produce these vaccines.
Mr. Gresser. One of the aspects of this particular waiver
is relatively easy right to export it to other countries. So,
that a country with quite a large medical establishment, say,
an India or an Israel, would probably be quite able to create a
productive capacity and export.
Mr. Lieu. Now, if the vaccine manufacturers did have a
capacity to produce these vaccines for people who need it then
there would be no need for this waiver, right?
Mr. Gresser. Yes. In the absence of an emergency situation
which governments did not know all the information and had to--
visible health emergency in their own countries, probably that
wouldn't be the same situation. There wouldn't be a real case
for a waiver in those in that situation.
Mr. Lieu. Thank you. I'd like to get more information on
this. It seems to me that by definition, ``emergency
situation'' may be something that people haven't thought of or
because it is an emergency, things happened very quickly and
the notion that any country can just all of a sudden stand up a
facility to make complicated vaccines just because they have a
patent doesn't seem realistic to me.
With that, I yield back.
Mr. Issa. I thank the gentleman.
We now go to the gentleman from Wisconsin, Mr. Fitzgerald.
Mr. Fitzgerald. Thank you, Mr. Chair. Mr. Sedam, I wanted
to kind bring it back to my own State in a discussion that I
know it has been happening for some time, and that is, since
1925, University of Wisconsin Madison has partnered with
Wisconsin Alumni Research Foundation, we call it WARF of in
Wisconsin. It sounds like you're very aware of that.
Mr. Sedam. Vitamin D.
Mr. Fitzgerald. To commercialize patents developed through
the university research. I know there is not a Member of
Congress who doesn't have a similar situation with a research
university in their State. This partnership has led to numerous
successful commercializations in the field of biotechnology.
How would an expansive WTO IP waiver effect research
universities or some of these other partnerships similar to
what we have in Wisconsin?
Mr. Sedam. With a $60 billion annual investment by the
Federal government a year in early stage research, that's a
great question.
So, I think it, again, adds a headwind on things. The trick
to all this is, as Mr. Lieu said, was you have to have a drug
to then decide that you don't want it, you want to waive the
patent right. If you don't get the drug, you have nothing to
fight over. When we add uncertainty into the IP world, whether
it's on attacks Bayh-Doyle, post parties review, things that
we've talked about today, it leads people not to make the
initial investment in the first place.
Remember, there are two kinds of investments at risk here,
it is the Federal government's investment in its own capacity
to create knowledge, and to create new ideas that lead to
products and services that make humankind better. That is at
risk because we need those patents. The universities file and
protect those and license those and start companies around
them. So, there is a significant, not only a risk to
development of products, but we do create over a 1,000 startups
companies a year, which leads to economic growth in our
regions, much like in Wisconsin and in New York City. Then,
universities clearly don't make products, right? We create and
disseminate knowledge. When those products find partners, those
partners have to be willing to invest $20 million, $50 million,
$1 billion, $2 billion to get that idea, that a nugget of an
idea that sits in a patent and make it into a product or
service that we can all use. The more risk you put into that
early stage, that says, Well, if you put that in, but maybe
someone will take it from us or maybe somebody will be able to
use it and not compensate us for it. It just reduces the
likelihood that either would be able to license it to an
existing company, or that we will be able to find the sources
of capital, whether it is seed investment, early stage capital,
venture capital who are willing to take not a technical risk,
not a market risk, not a financial risk, but a risk of the
unknown, and invest in those early stage technologies. So, I
think it is fairly significant, its TRIPS and those other
things that I mentioned about, especially Bayh-Doyle.
Mr. Fitzgerald. Thank you very much for that answer.
I'm just going to shift very quickly to Ambassador Shea.
This is a question more about it might be hard to articulate,
but kind of the environment or the feel. The Biden
Administration supported the initial WTO IP waiver on vaccine
patents based, in part, on assurances that were given by the
Chinese government that it basically would not make use of that
waiver authority.
As a former Chair of the U.S.-China Economic and Security
Review Commission, with many experiences, probably some good
and some bad, on experiences dealing with China-related issues,
do you think we should trust the Chinese when it comes to this
or is--that's why I think Members of Congress have a hard time
really gauging that, because that's not something we do on a
daily basis, right?
Mr. Shea. General Secretary Xi told President Obama that he
would stop--China would stop cyber espionage directed at U.S.
economic assets. He promised that China would not militarize
the islands in the South China Sea, violated the U.K.-Sino
agreement on Hong Kong.
As I mentioned earlier, each year USCR puts a report out
assessing China's compliance with its WTO obligations. Again,
the assessment was China's record of compliance is poor. So, I
do not take much--I don't give much account to a statement made
by a WTO representative of China at a general council meeting,
that's indirectly referenced in a footnote in a WTO ministerial
decision as binding. It does not--I don't take that too
seriously.
Mr. Fitzgerald. So, I'll put you down as a no.
Mr. Issa. I thank the gentleman.
We now get to what might end up be last and least, myself.
A number of questions, Ambassador Shea, and all of you are
very qualified, but you're the most recently qualified when it
comes to the actions of trade and what I would call coercion. I
think you alluded--both you and Mr. Busch alluded to this
earlier: The techniques that are regularly used to help
negotiate lower prices include part of TRIPS. Do they not? In
other words, if you, quote, ``Deny a drug,'' a country is
allowed to ignore the patent and make the drug because it's
been denied. Isn't that a basic principle that you deal with?
Mr. Shea. I haven't dealt with that extensively at the WTO,
but I think you're right. Yes, sir.
Mr. Issa. Under that TRIPS enforcement, Canada has used
that to set a price that they will pay for a drug with the
threat that they will make a generic if they don't get that
product. That's been going on for decades. It's one of the
reasons that brand drugs are slightly cheaper in Canada than
they are here, while generic drugs turn out to be more
expensive.
So, I'm going to go back to this specific waiver. Isn't the
use of this waiver in the sense of offering it, and the threat
of offering it in the future, doesn't it inherently adversely
affect the normal negotiations on licensing of companies,
technology to--around the world, not just in the developing
world, but even between the European and the U.S.
Mr. Shea. I think that's accurate. It does, as my
colleagues have said, it dampens the desire for investment in
these products or potential products. If the threat is out
there that I am going to use the waiver against you, that could
have a damaging effect as well.
Mr. Issa. Now, going back to alternatives to ever doing
this again, and I bring this out for a reason because it is
always good to say it's a challenge. Mr. Gresser, I'm going to
probably put this to you, if, in fact, in that emergency, we
had recognized that we wanted no one to die for lack of the
availability of this drug, weren't there a number of other
tools available to the Trump and then to the Biden
Administration, including using our war powers type act to
mandate the creation of additional facilities, or the
repurposing of additional facilities to make additional drugs
if there weren't a sufficient amount. Are those tools that are
available from the U.S. around the world, and they were used,
for example, on ventilators during the administration. Aren't
those tools that could have been used in lieu of this because
you've supported the idea of an initial waiver?
Mr. Gresser. I guess what I would say is that the response
to COVID pandemic was quite successful. The idea within a
couple of years you would, from a standing start, have a safe
and effective vaccine, you would produce it at a level able to
serve the entire world. You would have logistics and providers
able to deliver it to the patients. That's quite an impressive
achievement I believe.
Mr. Issa. So, we look at the model going forward, the use
of this waiver, again, until or unless other forms that do not
deny the intellectual property return or respect, wouldn't
those be better to push for either in statute, or, at least, in
practice by future administrations?
Mr. Gresser. I think governments do need to reserve some
right to take emergency actions in circumstances that they
can't foresee, which is probably--the next pandemic will be
slightly different than this one. We don't know quite what will
be necessary there. So, I hesitate to say we should never do X
or Y, but I think your point is a good one.
Mr. Issa. Why don't we just say that the next pandemic is
much worse, it's a new form of smallpox that a vaccine doesn't
work for, and it has a 70 percent morbidity, far worse than
COVID did.
Let's just say that this hit tomorrow, Mr. Massie brought
up a point, and I'm going it to use it because it was extremely
good. He likened this to an eminent domain, a taking of an
asset by an entity that needs it. When it comes to eminent
domain, have we ever seen eminent domain, even in a time of war
or emergency, not lead to a reimbursement for the value of that
taking?
Mr. Gresser. I do not know nearly enough about eminent
domain's history to answer that question.
Mr. Issa. OK, but you are aware that even our Constitution
calls that a taking not, even in time of war, not be without
compensation?
Mr. Gresser. Sure, yes. I guess what I would say in a
circumstance like the one you're describing, I think the U.S.
Government and other governments and businesses would put all
the money they needed into developing a treatment, as soon as
possible, and would clear up whatever messes later.
Mr. Issa. So, one of the things that's missing, and I'll go
back to our Ambassador, who is--and I saw you over there at the
last administration running in and out so fast you couldn't get
a second word in to a lot of people, so I know how hard you
worked in a number of areas. As we are looking at global trade
negotiations, isn't the TRIPS waiver even if continues to
exist, doesn't it lack that fair recognition that some
compensation for that taking should have been considered? The
taking for purposes of people not dying on the dais, would be
undeniable. The question of compensation, how would you deal
with that if you were, again, the trade representatives chief
go-to guy to go out there and do the work?
Mr. Shea. I wouldn't have gone for the waiver because it
was a solution in search of a problem, but I understand your
point. There is compensation envisioned, as Professor Busch
pointed out, with respect to the compulsory licensing regime in
TRIPS. So, yes, I would be saying if we're going to go down
this route, the inventors, the innovators need to receive some
sort of compensation.
Mr. Issa. Because I am last, I apologize if I go a little
over.
Mr. Busch, I am going to ask you the closing question,
because 5-7 percent on a drug that is a blockbuster, it might,
in fact, get you fully compensated, but on a great many drugs,
including orphan drugs, including drugs that are, as many of
new drugs are, I don't want to call their boutique, but they
are refined for a specific cancer, they are refined for a much
smaller group, 5-7 percent likely is never going to make you
whole. Many of these countries rely on, Oh, you were made whole
in your parent country, in Europe or the United States, and
thus shifting the make you whole back to the original inventor.
Should we, in fact, as a matter of global policy, be trying to
reform the system so that it not unfairly shifts the
responsibility, if you will, in a way in which they knowingly
could pay more, but choose not to, simply because they can use
compulsory licensing at an amount that they determine rather
than anything close to a fair market return?
Mr. Busch. Notice how I said in the courts delivering a 5-7
percent royalty. In other words, the generic provider probably
low-balled relative to the 5-7 percent, and the two sides ended
up in court. So, that doesn't bode well.
Mr. Chair, to your question, my biggest fear is that if you
do something like that, then we will have proponents of a
waiver of whatever mechanism you come up with. So, if you do
hold hearings on that, I'm happy and ready to testify.
Mr. Issa. Well, I can assure you that in addition to
courts, intellectual property, this committee, from Chair
Jordan on down, does believe that we need to protect the fair
return to those who create intellectual property, and that
continues to be attacked by those who believe that intellectual
property only matters if it's theirs.
With that, I see no further individuals--with that I yield
to the Ranking Member for a final question.
Mr. Johnson. Thank you, Mr. Chair.
Professor Busch, you did mention your discomfort with the
compulsory licenses being the mechanism through which payment
was determined. What other mechanism would you recommend?
Mr. Busch. My concern isn't about the payment per se, my
concern is that we have gravitated to one of many mechanisms
that might have produced an outcome more favorable. That in
other words, I do not see the compulsory license as the go-to
instrument for achieving lower prices.
There are other things, many of which are under control of
the developing countries themselves and could be put into
effect overnight. The idea that we sprang to this idea of a
compulsory license as really the only game in town, largely
because of the experience with the AIDS crisis was just wrong.
So, my frustrations isn't necessarily about the 5-7 percent, or
how that's determined. It's that we shouldn't have been looking
at compulsory licenses first.
Mr. Johnson. Thank you.
Mr. Gresser, do you agree or disagree?
Mr. Gresser. I guess I would say I agree, we shouldn't look
at compulsory licenses first. We should also recognize that we
don't know what the next crisis is going to be. We don't really
know what the best response to it would be. So, I don't think
we should disavow any particular response in advance, but we
should be--as I think the dilatory members have in the past,
able to recognize when we have a real emergency, and to limit
whatever we do to things that are specifically necessary or
seem to be necessary at the moment rather than extending it to
a range of the other topics and technologies.
Mr. Johnson. Thank you.
Mr. Shea and Mr. Sedam, I assume you'd both agree?
Mr. Sedam. Yes, I do. I think it was interesting with the
waiver that IP was the only--it came up very quickly and it
assumed that it was in the way, but it wasn't. So, it was the
only part of this process in terms of solving the COVID crisis
that didn't have to be proven that needed to be changed.
Everybody just said IP is going to be a problem. You brought up
the War Powers Act. If you know that you can't manufacture
something and you say, ah, I can't manufacture it, let me use a
different power to do that. With IP, it just was de rigueur
that this was going to be a problem before it was even shown
that it was a problem. I would hope next time we would try to
prove that this is actually in the way of getting things that--
there are people that stop people from dying. If it is a real
problem, then address it then, don't address it in the
beginning.
Mr. Johnson. Thank you. Thank you.
Mr. Issa. I'm going to close, not with a full statement,
but just with a remainder that Mr. Busch, you did you aptly say
that it seems to make no sense to waive what is effectively the
rights of the intellectual property that would have led to a
royalty or a product incorporating that royalty. While a
country chooses to continue to have tariffs or taxes that
artificially run up the cost of the medicine to their own
people.
So, I certainly think, although that's not within the
jurisdiction of this Committee, it's good for us to note that
in the future, or even in the near future, if there's an
attempt to have a further waiver, this Subcommittee and this
Full Committee will quickly ask you to opine again in person.
So, I want to thank you.
As I said in the beginning, if you want to revise and
extend, you can. Of course, somewhere here I have--it tells me
how many days, guys--five legislative days in which to include
extraneous material, and, of course, the questions that come to
you we would expect that you'd answer them timely, but we would
keep the record open longer for your response.
With that, we stand adjourned.
[Whereupon, at 11:43 a.m., the Subcommittee was adjourned.]
All materials submitted for the record by Members of the
Subcommittee on Courts, Intellectual Property, and the Internet
can
be found at: https://docs.house.gov/Committee/Calendar/ByEvent
.aspx?EventID=116047.
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