Wikipedia defines intellectual property (IP) as a category of property that includes creations of the human intellect. There are many types of IP, and some countries recognize more than others. The most well-known types of IP are copyrights, patents, trademarks and trade secrets. The main purpose of IP law is to encourage the creation of a wide variety of intellectual goods.
Now we have the U.S. endorsing an IP waiver at the World Trade Organization (WTO) for Covid vaccines and therapies.
Waiver proponents claim that breaking patent protections is justified as part of an effort to expand global access to vaccines. But is this really necessary? Any effort to reach an international agreement, build the necessary infrastructure, and begin to produce safe and effective doses are likely to take a year or more. The less developed world needs large quantities of fully tested and approved vaccines yesterday.
Currently, U.S. and European drug companies have already voluntarily agreed to a variety of licensing agreements with other manufacturers and are engaged in a major effort to scale up their own capacity.
India and South Africa, both large producers of generic drugs, have been pushing to suspend patents at the WTO for months.
It is difficult to anticipate how all of this is going work out. Investors need to be aware that there is movement afoot to unilaterally hand over corporate assets, almost certainly without compensation. This could create a new risk factor that should be weighed in making portfolio decisions.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®