Not Taking, Just Borrowing: Government Use of Patented Drugs

David Resnik and Kenneth De Ville (2002) propose five criteria that should be met before the government would be justified in manufacturing or distributing a patented drug without the patent holder's express authorization. The authors describe this use as an exercise of the government's eminent-domain powers and a taking of private property. I argue that such use is not a taking. Applying takings doctrine to intellectual property may inappropriately essentialize the concept of property and obscure important analytical approaches to patent-policy problems.

Scholars generally agree that property consists of a "bundle of rights," and that different properties and different types of property are composed of different bundles. Patents and real property consist of nonidentical but slightly overlapping bundles.

We generally understand real and personal property as involving rights to use, possess, exclude, and alienate (transfer by gift or sale). These are rights against private parties and the state. Recognition of these rights is a background assumption, developed through the complex interplay of law and custom. The precise contours of these rights vary greatly, depending on the particular property and the social context. Against this background, depriving an owner of the use or possession of her land, without her authorization or without strong justification, is viewed as a legal and moral wrong. Thus, under the Fifth Amendment to the U.S. Constitution it is unconstitutional for the government to take private property for public use without "just compensation."

Eminent domain and takings are real-property doctrines. The government may take title or some lesser rights (e.g., easements) in privately held land by exercising its powers of eminent domain (40 U.S.C.A. secs. 257, 258a). Private landowners must be appropriately compensated when they are deprived of possessory or use rights through eminent domain. The government may also effect a taking by regulation. Regulation that "goes too far" in diminishing or eliminating an owner's economically beneficial uses of her land will be considered an unconstitutional taking of property, unless the landowner is adequately compensated (Palazzolo v. Rhode Island, 533 U.S. 606 [2001]).

Since the 1920s the U.S. Supreme Court has struggled to articulate a standard by which to determine when regulations have gone too far. The Court recognizes that government would cease to function if every decrease in land value incident to regulation necessitated compensation. On the other hand, a compensation requirement prevents the government from "forcing some people alone to bear the burdens which, in all fairness and justice, should be borne by the public as a whole" (Palozzolo, 618).

The Court has held that the private landowner's reasonable, investment-backed expectations should play a role in determining the degree to which State regulation can modify her property rights without compensation (Palazzolo, 626-27). Of course, this formulation may be viewed as a mere moving of the goal posts; because now one must ask which of the landowner's expectations are reasonable and why. If regulations deprive an owner of all economic benefit from her land, they may be sustained without compensation only if the use interests proscribed were never part of the owner's title to begin with (Lucas v. South Carolina Coastal Council, 505 U.S. 1003 [1992], 1027).

Unlike real and personal property, patent rights are defined by federal statute (35 U.S.C. sec. 154). Patents do not include positive rights to use or possess the patented invention (Ossorio 2002). A patentee is granted the right to exclude others from making, using, selling, offering for sale, or importing the invention for a limited term of years. However, as noted by Resnik and De Ville, patents do not include the right to exclude the federal government. This right is not part of the patent bundle because the United States retains an absolute right to practice any patented invention, whether licensed or not (De Graffenried v. United States, 29 Fed.Cl. 384 [1993]). The United States also retains a nonexclusive license to make and use patented inventions arising from federally supported research; and under some circumstances it possesses the power to compel licensing...