Compulsory Licensing

A compulsory licence (CL) is an authorisation granted by a government that allows third parties to produce a patented product or use a patented process without the consent of the patent holder, and whose use will not infringe the patent. The grant of a compulsory licence is tied to specific requirements and constitutes an intervention when the exclusive right granted by the patent creates an imbalance between the objectives of rewarding innovation and ensuring social and economic welfare. 

CLs, as they are currently understood, are referenced, at the multilateral level, in the Paris Convention for the Protection of Industrial Property (CUP). This agreement provides for the possibility for a Member State to grant a compulsory licence as an instrument against abuses by the patent holder, but the provision therein evolved through the various amendments made to the Convention. 
In 1883, the wording of Article 5 of the CUP only required the patentee to exploit the invention in the country where he sought to obtain protection. This evolved, at the 1925 Hague Conference where the provision was extended to include the regulation of legislative measures to prevent abuses occurring as a result of the exclusive right conferred by the patent. In that case, non-exploitation was cited as an example, and one of the measures provided for was compulsory licensing. 
In addition to the compulsory measures to prevent abuses, the CUP provides sufficient flexibility for Member States to provide for other measures, for example compulsory licences under conditions other than those indicated in the fourth paragraph, as well as in other cases where the public interest requires it. 
The public interest requirement may occur, for example, where the patents granted relate to vital national interests in the field of military security, or public health or where so-called "dependent patents" are involved. In such cases, the rules of Article 5(3) and (4) of the CUP do not apply, so that Member States are free to legislate. 
If the mechanism of Article 5 is to be used when national legislation aims at preventing abuses which could result from the exercise of exclusive rights conferred by the patent, the rules given in paragraphs (3) and (4) are binding on the Member States and - in those countries which admit this possibility - can be directly invoked by the interested parties. 
With the adoption of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the member countries of the World Trade Organisation (WTO) had to modify their internal rules to adapt to international commitments. One of the central points of the Agreement is the possibility of establishing different forms of compulsory licences, which are expressly accepted in article 31. Like the rule established in the CUP, such licences are intended to mitigate the monopoly rights conferred by a patent by promoting competition from third parties. The compulsory licence does not deny the right of the patent holder to continue with the exploitation of the invention (through importation or local production) and among the requirements for its granting is that a remuneration (or royalty) is established to the holder for the use of his invention. 
Motivated by the HIV-AIDS health crises, in 2001, WTO Member governments adopted by consensus the Declaration on the TRIPS Agreement and Public Health at the Fourth WTO Ministerial Conference in Doha, Qatar. The Declaration highlights the flexibilities available to countries to adopt measures to protect public health. On the granting of CLs, the Declaration states that each Member is free to determine the basis on which such licences are granted. 
In addition, the Declaration states that the TRIPS Agreement refers to national emergencies and other circumstances of extreme urgency in connection with CLs, but only to indicate that, in such cases, it is not necessary to have attempted to obtain a voluntary licence before applying for a CL. The Declaration states that each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, and that crises affecting public health, such as HIV/AIDS, tuberculosis, malaria and other epidemics, may be considered such situations. 
Finally, the declaration promotes the amendment of the TRIPS Agreement to allow the export of pharmaceutical products, which were produced under a CL, to WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector. In 2005, the General Council for TRIPS adopted a protocol to amend the TRIPS Agreement to include Article 31bis that establishes a procedure for the use of compulsory licensing for the purpose of exporting to a third country with little or no capacity to produce such a pharmaceutical product. 
CL regimes have now been established in the vast majority of jurisdictions. They have been widely used in the US to correct anti-competitive practices and as part of the government's pre-eminent right to exploit any patented invention. The use of CLs by developing countries has been the subject of questioning by the pharmaceutical industry. Some developing countries have, however, begun to make more effective use of this safeguard. 
In Latin America, in 2007, Brazil granted a compulsory licence after a failed agreement with the patent holder to reduce the price of an antiretroviral (Efavirenz). Previously, in 2001, the government sought to grant a compulsory licence, but failed to do so, as the prices of the patented drugs it was targeting were significantly reduced as a result of the government's threat to grant the compulsory licence. 
In the same vein, Ecuador granted several compulsory licences since 2010 also in relation to antiretrovirals and other medicines, in accordance with Presidential Decree N° 118 of 16 November 2009, which declared "of public interest the access to medicines used for the treatment of diseases that affect the population of Ecuador and that are a priority for public health". This Decree opened the way for the granting of CLs on patents on medicines that are considered a priority from a public health perspective. Forty-two applications for compulsory licensing have been submitted in Ecuador, of which five were granted and 35 denied. Of the five that have been granted, in three of them the patents have already expired and in two of them the products under patent have so far never been produced.


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