A compulsory license provides that the owner of a patent or copyright licenses the use of their rights against payment either set by law or determined through some form of adjudication or arbitration. In essence, under a compulsory license, an individual or company seeking to use another’s intellectual property can do so without seeking the rights holder’s consent, and pays the rights holder a set fee for the license. This is an exception to the general rule under intellectual property laws that the intellectual property owner enjoys exclusive rights that it may license – or decline to license – to others.
Under UK patent law, a compulsory license is different from a statutory license. Under statutory license, the rate is fixed by law, whereas in case of compulsory license, the rate is left to be negotiated.
Many patent law systems provide for the granting of compulsory licenses in a variety of situations. The Paris Convention of 1883 provides that each contracting State may take legislative measures for the grant of compulsory licenses. Article 5A.(2) of the Paris Convention reads:
Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work. (See also Article 5A.(3) to (5) of the Paris Convention.)
According to historian Adrian Johns, the idea of compulsory licensing “seems to have originated as a serious proposition in the 1830s, although predecessors can be traced back into the eighteenth century,” and it was popular in the British anti-patent movement of the 1850s and 1860s. More recently an area of fierce debate has been that of drugs for treating serious diseases such as malaria, HIV and AIDS. Such drugs are widely available in the western world and would help to manage the epidemic of these diseases in developing countries. However, such drugs are too expensive for developing countries and generally protected by patents.
United States Edit
In the United States, if the federal government or one of its contractors infringes a patent, the only remedy available to patent holders is a lawsuit in the Court of Federal Claims. It is the policy of the U.S. Department of Defense to allow contractors to infringe patents and to defend the contractor against patent infringement claims at Government expense. Use of this provision by agencies other than Department of Defense is rare. During the 2001 anthrax attacks through the US Postal Service, the US Government threatened to issue a compulsory license for the antibiotic drug ciprofloxacin, if the patent owner, Bayer, didn’t lower the price to the government. Bayer lowered the price and the government backed down on the threat.
In March 2012, India granted its first compulsory license ever. The license was granted to Indian generic drug manufacturer Natco Pharma Ltd for Sorafenib tosylate, a cancer drug patented by Bayer. Non-governmental groups reportedly welcomed the decision.
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) Edit
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) also sets out specific provisions that shall be followed if a compulsory license is issued, and the requirements of such licenses. All significant patent systems comply with the requirements of TRIPs. The principal requirement for the issue of a compulsory license is that attempts to obtain a license under reasonable commercial terms must have failed over a reasonable period of time. Specific situations in which compulsory licenses may be issued are set out in the legislation of each patent system and vary between systems. Some examples of situations in which a compulsory license may be granted include lack of working over an extended period in the territory of the patent, inventions funded by the government, failure or inability of a patentee to meet a demand for a patented product and where the refusal to grant a license leads to the inability to exploit an important technological advance, or to exploit a further patent. TRIPs also provides that the requirements for a compulsory license may be waived in certain situations, in particular cases of national emergency or extreme urgency or in cases of public non-commercial use. Article 31.f of TRIPS requires that compulsory licenses be used “predominantly” for local markets, a requirement that complicates the ability of countries to import drugs manufactured overseas.
Doha Declaration Edit
This issue of compulsory licensing of drugs treating serious diseases was addressed by the Doha Declaration which recognized the problem and required the TRIPs council to find a solution. On 17 May 2006 the European Commission’s official journal published Regulation 816/2006, which brings into force the provisions of the Doha Declaration. This means that the declaration now has legal effect in the European Union, and also in Canada who implemented it in 2005. The declaration allows compulsory licenses to be issued in developed countries for the manufacture of patented drugs, provided they are exported to certain countries (principally, those on the UN’s list of least-developed countries and certain other countries having per-capita incomes of less than US$745 a year). However, it should be noted that this is not limited to only least-developed countries – every country that is a member of the WTO has the right under the TRIPs agreement to issue a compulsory license if there is a public health need. Some countries simply choose not to issue these licenses. From the text of the agreement: “Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.”