[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

=======================================================================

                                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                    
          
-----------------------------------------------------------------------------------     
              
                       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:]
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    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.

                                 [all]