Summary Report on “Compulsory Licensing” (SQ293)

This year the Patent Study Question addresses the question of compulsory licensing. The Study Question examines in particular whether additional harmonization of compulsory licensing is needed, the interests that justify the grant of a compulsory license (overriding interests), and the conditions and characteristics of such licenses. The Study Question also examines the supportive mechanisms for a functioning compulsory licensing system.

The issue of compulsory licensing has frequently resurfaced in recent times. While certain minimum standards for compulsory licensing have been laid out for long in the Paris Convention and in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), different jurisdictions implement and enforce compulsory licensing within their own statutory frameworks. This has resulted in differences in the grounds for the granting of compulsory licenses as well as in procedural aspects. Thus, as the question of compulsory licensing has re-emerged more prominently in recent years (e.g., due to the COVID-19 pandemic), also the question of further harmonization in this field has resurfaced. While compulsory licensing has traditionally been mostly linked to public health, there has also been

call for compulsory licensing in relation to various other technology areas in which inventions may have a high public interest potential (e.g., green tech, technologies to combat climate change, environmental hazards, e-waste, natural disasters, clean energy/infra). Further, while compulsory licensing regimes have been traditionally predominantly considered to cater to the domestic markets, the cross-jurisdictional nature of emerging issues has prompted a conversation on possibility of regional, or even broader, compulsory licensing regimes.

Study Question process and reports

AIPPI received reports from 38 groups and independent members, providing a comprehensive overview of national and regional laws, practices, and policies relating to compulsory licensing as well as insightful views on future policy considerations as well as proposals for improvements and harmonization.

Overview

The vast majority of the responding Groups support continued harmonization of compulsory licensing regimes. Many groups reflected on the need for a consistent application of Article 31 and 31bis of the TRIPS Agreement to enhance legal certainty and predictability given the cross border jurisdictional nature of IP matters.

Overriding interests

The majority of groups consider that the grant of compulsory licenses should be limited to specific overriding interests, such as public health, environmental circumstances and events, cybersecurity, security of national infrastructure, and national defense. However, there were divided opinions on whether economic security should constitute an overriding interest giving rise to compulsory licensing.

Cross-jurisdictional compulsory licensing

As to cross-jurisdictional compulsory licensing, the responding Groups were split. Should cross-jurisdictional compulsory licensing be available, the majority of the responding Groups consider that there should be a special organization or committee for operating cross-jurisdictional compulsory licensing. Further, the majority considered that, should such cross-jurisdictional compulsory licensing be available, it should be categorically available for overriding interests such as public health, environmental circumstances, and security of national infrastructure. However, there were divided opinions on whether cybersecurity, national defense, and economic security should give rise to such a cross-jurisdictional compulsory license (if available). Majority of the responding Groups consider also that the modalities enshrined in Article 31bis TRIPS should be extended to apply to cross-jurisdictional compulsory licensing.

Grounds for and procedural considerations on granting a compulsory license

As to the grant of a compulsory license, when an overriding interest is present, the majority of the responding Groups consider that national emergency, other circumstances of extreme urgency, unreasonable pricing, non-working/insufficient working, and related or dependent patents should be considered as justified grounds for granting a compulsory license. However, general public interest, public non-commercial use, and unmet needs were not considered justified grounds as such by the majority. Further, while the responding Groups were split on the significance of (non-)working of the patent in determining of the grant of a compulsory license, a strong majority of the Groups considered that there should not be categoric prohibition against compulsory licenses being available if the patent is currently not being worked within the jurisdiction involved but has in the past been worked within the jurisdiction involved.

Further, the majority considered that there should continue to be a requirement of an effort to obtain a license on commercial terms (a voluntary license) and that a disagreement on the cost of a voluntary license should not in itself constitute a sufficient criterion for initiation of procedure of compulsory licensing. The majority also consider that the potential licensee should bear the burden of proof for establishing that the conditions for the grant of a compulsory license have been met. The patentee should always have the right to receive prior notification and be heard in cases of compulsory licensing.

Scope and characteristics of compulsory licenses

Majority of the responding Groups considered that compulsory licenses should be available to granted patents and patent term extension (e.g., SPCs), but not for patent applications, and for any party including, e.g., governmental bodies, non-commercial research organization, other non-profit organizations, and commercial entities.

Further, the majority considered that compulsory licenses should be categorically non-exclusive, non-transferable (except in the context of transfer of the relevant business/assets), non-sublicensable, and available for all activities within the scope of the patent. Majority of the responding Groups also consider that compulsory licenses should be limited for the duration of the existence of the overriding interest, to specified products/processes, to specified quantities or volumes, and to specified uses of the patented invention. Some Groups also consider that the territory should be limited to the territory of the patent while others considered that the territory should be defined by the emergency in question.

It is also notable that majority of the Groups consider that the patentee should not be required to provide to the compulsory licensee any further information on the implementation of the patent (including not provide any trade secrets or other know-how for the purposes of the compulsory licensee to work the invention effectively).

Remuneration

The Groups share a unanimous view that the patentee should always be entitled to remuneration for a compulsory license, based on reasonable compensation comparable to a license fee. Further, There should be no fixed cap on remuneration, and the method for calculating it should be determined case by case.

Monitoring of compliance with the license terms

Majority of the responding Groups consider that the compulsory licensee should provide periodic reporting of the exploitation of the license, and the patentee should have the right to audit the licensee. Many Groups also consider that additional measures, such as voluntary disclosures by the licensee, periodic checks of the continued existence of the public interest having given rise to the compulsory license, penal provisions for licensee if the compulsory license is not used, price monitoring, as well as periodic reassessment of the remuneration based on market performance, sales volumes, and/or profit margin should be available to ensure that the use of the license remains within its permitted sphere. Many of the Groups would place primary responsibility for monitoring compliance with the granting authority with additional burden placed on the patentee.

Revocation of compulsory licenses and remedies

All the responding Groups consider that compulsory license should be revocable or otherwise capable of being terminated during its term. In more specific, the overwhelming majority of the responding Groups consider that compulsory licenses should be revocable, if the circumstances having led to their grant cease to exist or are unlikely to recur, if there is a breach of the license, or if remuneration is not paid. A vast majority of the responding Groups consider that damages and fines should be available for the patentee against breach of the compulsory license. Some Groups also suggested other additional remedies, e.g., injunctions, specific performance, criminal sanctions, as well as seizure and forfeiture of products.

Next step: Preparation of the First Draft Resolution by the Study Committee Leadership. See you in Yokohama!