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In case of a cure: A compulsory licence as the last resort

In case of a cure: A compulsory licence as the last resort

In patent law, the compulsory licence is a measure that is discussed in every academic course, but that discussion is usually concluded with the remark: “In practice, this measure is never implemented.” Will the current pandemic change that?

A patentee enjoys a monopoly on putting a specific invention into practice. The patentee has the exclusive right to implement the invention himself or to grant one or more licensees the right to do so. As a monopolist, the patentee is in an extremely strong position as far as the exploitation of an invention is concerned. There are, however, restrictions to the power of the patentee.

Although medical treatment as such is excluded from patent protection in practically all jurisdictions, it is possible to obtain a patent for a medicinal product for treating a specific medical indication (providing the product is new and inventive). Even if a therapeutically active substance is known to be effective in the treatment of a specific medical condition, patent protection may be sought for a new and inventive application of that substance. Thus, a vaccine against the COVID-19 (or an effective cure), whether it is based on a newly-developed substance with that purpose in mind, or if it is found that a known drug is effective, may be patentable. It is also conceivable that the research currently being carried out will bring to light that a substance that was patented prior to the corona crisis (surprisingly) can offer a solution to our problems.

The patentee of such an invention would then find itself in a very powerful position, as the application of the vaccine or cure depends on their approval. Does patent law provide protection from potential abuse by such a dominant party?

A restriction of the exclusive position of the patentee

Article 30 of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPs) allows countries to adopt legislative exceptions to the exclusive rights held by a patentee. Apart from these restrictions, TRIPs Member States have the option to allow for a compulsory licence, a legal provision that allows for the licensing of intellectual property rights to third parties without the rights holder's consent. Compulsory licensing, which can also be aimed at government use, is subject to conditions that protect the interests of the patentee. The main conditions have been laid down in Article 31 TRIPs.

Article 31 sets out that the granting of a compulsory licence is to be considered on the individual merits of the case at hand. Primarily, there is the obligation to first attempt to acquire a voluntary licence on reasonable terms and conditions before a compulsory licence can be ordered. In the case of a national emergency or other situations with extreme urgency, an exemption can be granted with respect to this condition, notwithstanding the obligation to notify the patentee of the compulsory licence as soon as possible.

The scope and duration of the use authorised under the compulsory licence, which can only be non-exclusive, shall be limited to the purpose for which the licence is granted. Furthermore, there is the requirement to pay adequate remuneration, taking into account the circumstances of the case at hand, an important aspect being the economic value of the licence. The granting of a compulsory licence must be subject to judicial or other independent review. Finally, Article 31 states that compulsory licences should primarily be for domestic use, and that the licence is non-transferable.

The conditions of Article 31 should be read in conjunction with the provisions of Article 27(1) TRIPs. The latter require that patent rights shall be available for all fields of technology, and that patents shall be available without discrimination as to the place of invention, and whether products are imported or locally produced.

The compulsory licence under Dutch patent law: Article 57 DPA

Aside from the TRIPs’ conditions discussed above, compulsory licensing is a matter of national patent law. In the Netherlands, the most important provision on this subject is Article 57 of the Dutch Patent Act (DPA).

Section 1 of this provision states that it is the Minister (of Economic Affairs, currently Mr Eric Wiebes) who has the power to grant a compulsory licence to a party (or parties) of their choice, should they be of the opinion that this is required by the common interest.[1] The compulsory licence is to have a clearly defined scope, limiting the subject matter according to the needs of the specific situation that has given rise to granting such a licence.

With the exception of urgent matters, the Minister must first enquire whether the patentee is willing to voluntarily grant a licence under reasonable terms. Only after it has been established that this is not the case, may a compulsory licence be granted. There are no provisions as to the specific conditions of such a licence. It is assumed that the patentee and the party designated to become the compulsory licensee will be able to reach an agreement on those conditions, including the reasonable remuneration. At their discretion, the Minister can grant the licence subject to the provision of a security deposit by the licensee, with a view to the reasonable remuneration the patentee is entitled to.

When is a matter considered to be of common interest within the meaning of this provision? The Dutch legislature has clarified that this concept is to be interpreted very broadly.[2] Issues concerning public health, such as the availability of an effective vaccine against a pandemic virus infection, doubtlessly would qualify as such.

A compulsory licence to combat corona?

In normal circumstances, the development of medicinal products is known to take years rather than months or weeks. Since the beginning of the COVID-19 outbreak, numerous initiatives researching possible solutions to the current crisis have been reported, both from public and private parties. One can only hope that the tremendous efforts that are now being directed at finding a vaccine or a cure for corona will be successful in the short term.

Assuming a solution (or several solutions) will eventually be found, it is likely that the successful inventor(s) will seek (or will already have obtained) patent protection. Once such a patent is granted, the fate of the world, or at least the health and well-being of millions of citizens, will be in the hands of one or a few patentee(s). Will we then be dependent upon the benevolence of this as yet unknown party, which in all likelihood is motivated – at least partially – by commercial considerations? Will the patentee be able to address the overwhelming demand for the patented solution itself or will it grant licences to third parties, allowing for a broad application of the invention?

From the above it will be clear that whatever the answers to these questions will be, patent law offers a solution that will – one way or the other – allow all of us to benefit from the innovative efforts of the smart men and women currently working on a vaccine or cure. The possibility of a compulsory licence being granted may motivate a patentee to act responsibly, or at least allow for an intervention should the motivation be insufficient.

The compulsory licence is a drastic measure, the last resort in extraordinary times. So far, it has not been necessary to put it into practice. I expect that also in the near future, it will remain a subject for academic debate rather than a real and effective instrument of public health policy. However, throughout these past few weeks more than a few expectations have been proven wrong. The only certainty seems to be that of alarming and unprecedented developments on a day-to-day basis. In these circumstances, the mere availability of the compulsory licence is a comforting thought.

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