• Paul Peter Nicolai

COVID-19 Compulsory Patent Licensing Law

A patent gives the owner the legal right to sue other parties for making, using, selling, or importing the patented matter.


Compulsory patent licensing refers to situations where another entity—after meeting certain criteria—can nevertheless make, use, sell, or import the patented matter without permission. Examples of conditions that may allow a compulsory license include national emergency or extreme urgency where the invention serves vital public health needs, or where a patent owner has abused its economic power in violation of antitrust laws.


In the case of COVID-19 vaccines, there has been speculation about a potential role for compulsory patent licensing if a vaccine is invented and patented but supply cannot keep up with demand. While there are many factors that could cause a vaccine supply shortfall, any patent rights perceived to contribute to that shortfall would likely give rise to interest in compulsory licensing.


This reviews the current state of compulsory patent licensing in the United States, Canada, and Europe, three jurisdictions are significantly involved in COVID-19 vaccine development.


United States

U.S. patent law does not include a general compulsory licensing provision. Other US laws include provisions that allow for compulsory licensing of patented inventions. For example, the Atomic Energy Act, Clean Air Act, and Plant Variety Protection Act provide for compulsory licensing, of which are rarely used.


The Bayh-Dole Act gives the federal government a narrower set of rights, called “march-in rights,” for federally funded inventions. March-in rights come are restricted. The government may only use such rights if the patented invention was developed using federal funding. To date, the march-in rights have not been used.


Under U.S. antitrust law, compulsory licenses occasionally have been awarded as a remedy for antitrust violations. In a patent litigation, a court may refuse to award an injunction to a prevailing patent owner during infringement litigation, an outcome like granting a compulsory license.


Internationally, the U.S., Canada and the countries of Europe are signatories to the Paris Convention for the Protection of Industrial Property (Paris Convention). The Paris Convention says its member states can take legislative measures for the grant of compulsory licenses to prevent abuses which might result from the exercise of exclusive rights conferred by patent, for example, failure to work.


The U.S. is also a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Article 31 of the TRIPS Agreement restricts the issuance of compulsory licenses by requiring the applicant make efforts to obtain authorization from the patent owner on reasonable commercial terms and conditions. The scope and duration of the compulsory license is limited, nonexclusive, and revocable, and the patent owner must be adequately compensated.


Canada

Canada has a more direct federal response to the COVID-19 pandemic compulsory patent licensing. In March 2020, the Canadian government passed the COVID-19 Emergency Response Act (Bill C-13), which introduced provisions to the Canadian Patent Act that expand the government’s ability to procure patented inventions— including medicines and medical devices—in response to the COVID-19 crisis. While Canada’s Patent Act already contemplated limited compulsory licensing, the new provisions allow a time-limited compulsory license of patent rights even where the patentee is able to satisfy demand for its patented invention. It is unlikely the new provisions will be invoked unless a patentee fails to meet Canadian demand for its invention or the patentee’s terms are unreasonable given the Canadian government’s experience negotiating with patentees regarding compulsory licensing.


There is precedent for the Canadian government seeking a compulsory license from a pharmaceutical patentee. In 2001, following anthrax terrorist attacks in the U.S., the Canadian government ordered ciprofloxacin, an antibiotic for treating anthrax, from generic manufacturer Apotex. At that time, the only manufacturer with a notice of compliance for ciprofloxacin was the patentee, Bayer. The government claimed that Bayer had an insufficient supply of the patented medicine. Bayer threatened legal action and noted that the Canadian government had not complied with the Patent Act requirement to apply to the commissioner for authorization. Eventually, Bayer agreed to supply the government with ciprofloxacin should the need arise.


This episode provides several lessons for patentees. First, the Canadian government is willing to seek compulsory licenses during national emergencies. Second, patentees should ensure that the requirements of the Patent Act are in fact followed. With respect to the COVID-19 provisions, the government is still required to notify the patentee and apply to the commissioner for authorization. Third, it may be prudent for patentees to approach the Canadian government and negotiate an agreement. If the manufacturer of a viable COVID-19 vaccine can meet Canadian demand on reasonable terms and in a timely manner, it may want to consider negotiating a supply agreement with the government.


Europe

Compulsory patent licensing in Europe is governed by international agreements, European Union law, and national law. In general, the Paris Convention recognizes each country’s own competence to set the conditions for compulsory patent licenses. There are certain mutual regulations for European countries that lead to many similarities in how individual countries deal with compulsory licensing issues.


The first international ruling is the TRIPS Agreement. The TRIPS Agreement allows compulsory licensing as part of the agreement’s overall intention to balance necessary access to existing products and technology against promoting investment into research and development of new products and technologies.


To receive a license under Article the TRIPS Agreement, normally, the individual or company seeking a license must have first shown significant attempts to obtain a voluntary contractual license from the patent owner on reasonable commercial terms and conditions.


If a compulsory license is ultimately issued, the licensee needs to pay adequate compensation to the patent holder. In the case of a national emergency or other circumstances of extreme urgency or in cases of public noncommercial use or anticompetitive practices, there is no need to try to attempt to obtain a voluntary license in advance.


In addition to TRIPS, a 1998 European Union Biotech Directive on plant variety rights provides a degree of clarity on which inventions are patentable or not in the field of biotechnology on ethical grounds. Specifically, where a plant breeder cannot acquire or exploit a plant variety right without infringing a prior patent, it may apply for a compulsory license for nonexclusive use of the invention protected by the patent. Consistent with TRIPS, these licenses require a preceding unsuccessful attempt to get a contractual license, and the plant variety or invention needs to constitute significant technical progress of considerable economic interest compared with the invention claimed in the patent or the protected plant variety.


Many EU countries have implemented guidelines on compulsory licenses from the Biotech Directive into their intellectual property statutes, although possible requirements for the grant of such licenses may differ between the countries. Even though EU directives are generally not directly applicable in a member state, the European Court of Justice has ruled that individual provisions of a directive can have direct effect in a member state without implementation under the following conditions: (1) the directive has not been transposed into that member state’s national law or has not been properly implemented; (2) the provisions of the directive are mandatory and sufficiently clear and precise; and (3) the provisions of the directive confer rights on individuals. So, in situations where certain member states of the European Union have not implemented a particular directive, there are good chances it is, at least in part, still valid in such state.


Additionally, there is the Compulsory License Regulation that establishes a procedure for the grant of compulsory licenses for patents and supplementary protection certificates on the manufacture and sale of pharmaceutical products when the products are intended for export to eligible importing countries in need of them to address public health problems. The license under this regulation is subject to a reasonable compensation, which is limited to a maximum of 4 percent of the total price to paid by or for the importing country. This regulation is directly applicable in EU member states.


Finally, the national law in all EU member states and non-EU states throughout Europe. In general, compulsory licensing under Europe’s national laws is a rare exception, is subject to strict procedures, and appropriate payment for the owner of the patent rights.


While COVID-19 has raised significant issues and discussion points on compulsory patent licensing, the law in the United States, Canada, and Europe shows that compulsory patent licensing is a rare event, even in a global pandemic.

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