A few days ago marked the final step in the establishment of UNITAID initiated patent pool, with negotiations with drug companies expected to start soon. This got me thinking about the viability of patent pools as a concept, in the endeavour to create better, cheaper (or in some cases, just create) drugs for developing country diseases. As a clarification, I do not know exactly what kind of model UNITAID's patent pool is using. I am simply raising some general questions on the topic of patent pools as they crossed my mind. I'm not attempting to answer all the questions I'll be raising, but merely will be raising them as food for thought. Readers are welcome to add in their own views in the comment section.
Firstly, to start with, why aren't patents sufficient on their own? The simplest version of this is that patents are geared towards discovering medicines which, once on the market, provide sufficient sales so as to recover the massive costs that go into the drug discovery process. Therefore, they are tied to the ability of the consumer for that drug to be able to pay large costs. Automatically therefore, diseases prevalent in developing countries don't receive sufficient attention since their people cannot afford the same high costs, especially not when compared to the large income generated if they focus on developed markets. (I've discussed a few more issues with pharma patents in the latter half of a previous post here)
Of the many alternative innovation mechanisms that have been aired, patent pools are among one of the more prevalent. It has several obvious benefits. It works within the patent system and doesn't require a massive shift to another type of innovation system. It reduces transaction costs by requiring cross-licensing to all members of the pool, and these reduced costs also increase incentives to develop such drugs. It also of course, clears blocking patents. However, there are also several questions which arise. What exactly are the incentives for companies to join these patent pools? Or more specifically, what incentives are there for companies to throw in their patents into these pools, when they could otherwise make monopoly profits off of it? Maybe they couldn't make monopoly profits off of it, but then, how much is such a patent worth? (I admit though, there could be instances of patents being valuable in themselves, yet unusable by the company due to various reasons)
Also, how is the equity of membership determined? Small and start up companies would obviously want in on patent pools, as it would give them access to much more than they could've gathered on their own. And the large behemoths, perhaps, could manage without them. Essentially, for the larger companies, its more give than take, and for the smaller companies, its more take than give. On the whole, it balances out and works in everyone's greater interest, but I don't see this convincing any management board of a large company to join a patent pool.
Yet, it is the larger companies that the patent pools rely on to work, since this is where most of the important patents are. Something seems amiss here.
Perhaps, membership to a patent pool would be on the condition that companies add their patent portfolio to the pool. This however, raises more questions. Would it be more optimal to make companies put in a few selected ones (where a company could then put in their least successful patents), or would it be more optimal to make companies add their whole patent portfolio? Putting in the whole portfolio seems like a condition no established company would agree to for obvious reasons, yet allowing companies to choose which patents they put in also seems self-defeating.
Or perhaps companies are just paid for particular sought after patents, which are then shared to all members of the pool? This would then raise the question of ownership of patents, since effectively it would be the patent pool buying the patent, (or a license to the patent), rather than allowing cross licensing between member companies. One word - Troll. The only thing stopping a patent aggregation body from becoming a troll, seems to be a good conscience.
Thirdly, if patent pools require companies to add patents into their patent pools, they would be indirectly encouraging patenting. If patent pools are acting as 'alternatives' to the normal patent situation (which is evidently creating innovation problems), isn't it problematic to use a method which encourages the making of more patents, possibly even leading to patent thickets?
No doubt, as much as we'd like to believe otherwise, big companies are not always evil. There are plenty of instances of big companies making considerably generous donations to 'good' causes, and perhaps, that's how the necessary patents will come into a patent pool. However, I find it hard to base a innovation model simply on goodwill. Especially when common business sense tells companies that profit is the main objective, and goodwill can be incidental.