Abstract
This chapter discusses the existing framework of compulsory licensing at the international level and the grounds upon which licences can be granted. The chapter uses that background to analyse whether patent law’s social contract is a reason in favour of compulsory licensing. The chapter finds that compulsory licensing is worthy of thorough consideration in order to promote competition. However, whether competition is promoted will be fact specific, technology specific, market specific, and timing specific. The chapter concludes that just as the social contract of patent law requires balance, so too does the use of compulsory licensing. Consequently, compulsory licensing deserves greater attention as a means to contribute to rebalancing patent law’s social contract.
S. Frankel is Professor of Law and Director New Zealand Centre International Economic Law. J.C. Lai is Postdoctoral Researcher.
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Notes
- 1.
- 2.
Menell (2000), at pp. 146–147. Of course the distinction between invention and innovation is by no means well delineated. The two usually take place simultaneously. For example, further invention may be required to bring something to market. This further invention may even be patentable.
- 3.
- 4.
Chisum et al. (2001), at p. 15.
- 5.
Landes and Posner (2003), at pp. 294 and 326–332.
- 6.
Gervais (2012), at para. 2.113. Disclosure is one method of diffusion; others, although controversial, may include investment.
- 7.
Eisenberg (1989), at p. 1022.
- 8.
Drahos (2010), at pp. 27–32. MacQueen et al. (2008), at paras 10.15–10.16. See also chapter ‘Fair Use: A Workable Concept in European Patent Law?’ by Geertrui Van Overwalle, in this volume.
- 9.
The international requirements for disclosure are found in the WTO, Agreement on Trade-Related Aspects of Intellectual Property Rights, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 UNTS 299; 33 ILM 1197 (adopted on 15 April 1994, entered into force 1 January 1995) [“TRIPS” or “TRIPS Agreement”] Article 29, which provides: “Members shall require that an applicant for a patent shall disclose the invention in a manner sufficiently clear and complete for the invention to be carried out by a person skilled in the art and may require the applicant to indicate the best mode for carrying out the invention known to the inventor at the filing date or, where priority is claimed, at the priority date of the application”.
- 10.
As per the exclusive rights under TRIPS, supra note 9, Article 28.
- 11.
As specifically held by the US Supreme Court in Continental Paper Bag Co. v Eastern Paper Bag Co., 210 U.S. 405 (1908).
- 12.
TRIPS Agreement, supra note 9, Article 32.
- 13.
Gervais (2012), at para. 4.424. Gervais also notes that attempts were made during the negotiation of TRIPS to limit revocation to cases where a patent failed to meet the criteria for grant, but these were not successful. The WIPO, Paris Convention for the Protection of Industrial Property, 828 UNTS 303 (adopted on 20 March 1883, entered into force 16 April 1970), as revised at Stockholm (14 July 1967), Article 5.A(1) stipulates that “[i]mportation by the patentee into the country where the patent has been granted of articles manufactured in any of the countries of the Union shall not entail forfeiture of the patent”, And Article 5.A(3) states that “[f]orfeiture of the patent shall not be provided for except in cases where the grant of compulsory licenses would not have been sufficient to prevent the said abuses”. Articles 1–12 and Article 19 of the Paris Convention are incorporated into TRIPS in Article 2.1. See also Blakeney (1996), at paras 8.19–8.20 and 8.31.
- 14.
Australia does. However, this is only after a compulsory licence has been granted and the lapse of two years if “the reasonable requirements of the public with respect to the patented invention have not been satisfied” and “the patentee has given no satisfactory reason for failing to exploit the patent” or the patentee is contravening competition law. Patents Act 1991 (Cth), s. 134; and Patents Regulations 1991 (Cth), reg. 12.2(1). Rather contradictory, however, s. 138 of the Patents Act 1991 (Cth) states that revocation can only be made “on one or more of the following grounds, but on no other ground”, but the list that follows does not include the revocation ground held in s. 134.
The New Zealand Patents Act 2013 also allows courts to revoke patents if they are “satisfied that the patentee has, without reasonable cause, failed to comply with a request of the government department to exploit the patented invention for the services of the Crown on reasonable terms” [s. 108(1)].
- 15.
- 16.
Gervais (2012), at para. 2.113.
- 17.
Ibid., at para. 2.113.
- 18.
See Frankel (2013), at sects 4.2.3(e) and 7.1.3.
- 19.
- 20.
See Strandburg (2004), pp. 81–155. Where exceptions do exist, they are usually drafted with vague terminology incorporating nebulous distinctions, leaving both owners and users unsure of their positions. See OECD, ‘Genetic Inventions, Intellectual Property Rights and Licensing Practices: Evidence and Policies’ (2002), at p. 81. In contrast, copyright law has strong exceptions, the contours of which are regularly contested before courts.
- 21.
Cornish et al. (2010), at paras 7-40 and 21-22. Compulsory licence regimes are implemented differently in different states; e.g. 28 USC § 1498; Patents Act 1977 (UK), ss 48–50; Patents Act 1953 (NZ), s. 46; Patents Act 1990 (Cth), s. 133; and Agreement Relating to Community Patents—Done at Luxembourg on 15 December 1989, 89/695/EEC, OJ L 401, 30/12/1989 P. 0001–0027, Articles 45–47. Most Commonwealth countries also allow for Crown Use under certain circumstances, which could also be used for the purposes of local working of patents or meeting consumer demand and public expectation, particularly in emergencies, as the provisions usually do not require that attempts to negotiate a licence have already been made; e.g. Patents Act 1953 (NZ), s. 55; Patents Act 1990 (Cth), s. 163; and Patents Act 1977 (UK), s. 55. For discussion on compulsory licences in other jurisdictions, in this volume, see Jakkrit Kuanpoth, ‘Compulsory Licences: Law and Practice in Thailand’; Philipp Maume, ‘Compulsory Licensing in Germany’; Carlos M. Correa, ‘The Use of Compulsory Licences in Latin America’; and Kung-Chung Liu, ‘Compulsory Licence and Government Use in Taiwan: A Regress’.
- 22.
- 23.
Blakeney (1996), at para. 8.19.
- 24.
The difference between exclusions and exceptions is explained by Lionel Bently and Brad Sherman, chapter ‘Limiting Patents’, in this volume. That a compulsory licence is sought or granted is not indicative of there being a valid patent, as it may be that a second or subsequent user would license, whether or not the patent was valid, because it would be cheaper and quicker to obtain a licence (even if compulsory) than challenge the patent.
- 25.
Paris Convention, supra note 13, Article 5.A(2) (emphasis added). The term “insufficient working” is stipulated in Article 5.A(4). The Paris Convention further states that compulsory licences can only be applied for 4 years after the date of filing or 3 years from the date of grant, whichever period expires last [Article 5.A(4)]. It also states that an application for a compulsory licence “shall be refused if the patentee justifies his inaction by legitimate reasons”, which is a broad and liberally interpreted defence [Article 5.A(4)]; Blakeney (1996), at para. 8.20.
- 26.
Paris Convention, supra note 13, Article 5.A(4).
- 27.
As noted by Kuanpoth, supra note 21, the term “failure to work” is not defined in the Paris Convention.
- 28.
Patents Act 1953 (NZ), s. 46(2); and Patents Act 2013 (NZ), s. 164(2).
- 29.
Patents Act 1977 (UK), s. 48A, which deals with compulsory licences for patentees who are WTO proprietors.
- 30.
Patents Act 1977 (UK), s. 48B, which deals with compulsory licences for patentees who are non-WTO proprietors.
- 31.
Patents Act 1990 (Cth), ss 133(2)(a)(ii) and 135.
- 32.
Correa, ‘The Use of Compulsory Licenses in Latin America’, who notes that the change in understanding of “working” a patent to include importing the invention was a consequence of globalisation.
- 33.
TRIPS Agreement, supra note 9.
- 34.
- 35.
TRIPS Agreement, supra note 9, Article 27. Michael Blakeney suggests that this means importation does satisfy the Paris Convention working requirement. See Blakeney (1996), at para. 8.22.
- 36.
Gervais (2012), at para. 2.409. In contrast, see Correa, ‘The Use of Compulsory Licenses in Latin America’.
- 37.
TRIPS Agreement, supra note 9, Article 2.1.
- 38.
Though Article 31 of TRIPS is clearly the main clause for compulsory licensing, some have argued that such provisions can also come under Article 30, which is the general clause for limiting patentees’ exclusive rights. For example, Belgium contends that its provisions for compulsory licensing are justified under Articles 8 and 30. By doing this, they are able to side-step the conditions set out in Article 31. See the discussion by Reichman (2010), at p. 598. Daniel Gervais has stated that according to lex specialis, Article 30 cannot cover cases of use by governments or by third parties authorised by governments, as this is covered by Article 31; Gervais (2012), at para. 2.396.
- 39.
It did in earlier drafts [as 31(n)] but was removed between the Brussels Draft and the Dunkel Draft. See Gervais (2012), paras 2.400–2.408.
- 40.
TRIPS Agreement, supra note 9, Article 31(b) states that a licence may only be granted if efforts have been made to obtain authorisation from the patent owner on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time.
- 41.
TRIPS Agreement, supra note 9, Article 31(k). In such cases, conditions (b) and (f) do not have to be satisfied when a judicial or administrative process has permitted use to remedy the anti-competitive practice, i.e. there does not need to be a refusal to deal, and the licence can be for the supply of non-domestic markets. In the US, patent legislation does not specifically allow for compulsory licences; however, they are allowed under US antitrust law; Correa (2000), at p. 95. For a discussion on the relationship between compulsory licences and competition law in Germany, see Maume, ‘Compulsory Licensing in Germany’.
- 42.
TRIPS Agreement, supra note 9, Article 31(b). In a national emergency or other circumstances of extreme urgency, there does not need to be a refusal to deal.
- 43.
TRIPS Agreement, supra note 9, Article 31(b). In cases of public non-commercial use (i.e. government use), there does not need to be a refusal to deal. See also Blakeney (1996), at para. 8.26.
- 44.
The “public interest” is not an implied ground for compulsory licensing from Article 31 of TRIPS. However, as will be discussed further, interpretation of TRIPS allows one to take into account the broader concept of the “public interest” from Articles 7 and 8 of TRIPS.
- 45.
TRIPS Agreement, supra note 9, Article 31(l) provides that when a licence for a first patent is required in order to exploit a second, Members may also authorise compulsory licences if the invention claimed in the second patent involves an important technical advance of considerable economic significance in relation to the invention claimed in the first patent, the first patent owner is entitled to cross-license on reasonable terms, and the licence to the first patent is non-assignable, except with assignment of the second patent.
- 46.
As also noted by Kuanpoth, ‘Compulsory Licences: Law and Practice in Thailand’.
- 47.
Gervais (2012), at para. 2.409.
- 48.
Note: Article 31bis, implemented by the WTO General Council, ‘Amendment of the TRIPS Agreement’, Decision of 6 December 2005 (WTO Doc. WT/L/641, 2005), to allow developing countries to import pharmaceuticals from other states with compulsory licences when they do not have the capacity to manufacture. However, implementation required that two-thirds of the WTO Members ratify the Article by 1 December 2007, which did not happen. The deadline was extended to 31 December 2009, 31 December 2011 and then to 31 December 2013 (see http://www.wto.org/english/tratop_e/trips_e/amendment_e.htm). Until then, a “Waiver” has been in place since 2003; WTO General Council, ‘Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health’, (WTO Doc. WT/L/540 and Corr.1, 2003). For discussion, see Reichman (2010), at pp. 592–596; and Verma (2010), pp. 623–672.
- 49.
TRIPS Agreement, supra note 9, Article 31(a) and (c)–(j).
- 50.
TRIPS Agreement, supra note 9, Article 2.2.
- 51.
- 52.
Cornish et al. (2010), at paras 7-41–7-42 and 21-19. See also chapter ‘Legal Remedies Against Abuse, Misuse and Other Forms of Inappropriate Conduct of IP Right Holders’, by Reto M. Hilty, in this volume.
- 53.
28 USC § 1498; and Rushing (2012), pp. 879–916. As a TRIPS Agreement matter, this is where Article 44.2 (and Article 73) TRIPS functionally supersede Article 31, which requires notification and remuneration [paras (b) and (h)].
- 54.
Rushing (2012).
- 55.
Ibid., at para. 7-43; Berman and Dreyfuss (2006), at p. 907; Resnik (2003), p. 3; and ALRC (2004), at paras 27.21–27.22. See also Kuanpoth, ‘Compulsory Licences: Law and Practice in Thailand’.
- 56.
- 57.
See Gervais (2014). For a different view see Reichman (2010), at pp. 614–618; chapter ‘Economic and Procedural Constraints of Compulsory Licenses for Medicines’, by Yugank Goyal, in this volume; and discussion in Part IV infra.
- 58.
See supra notes 8 and 9.
- 59.
Gervais (2012), at para. 2.111.
- 60.
TRIPS Agreement, supra note 9, Article 7 Objectives
The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.
Article 8 Principles
1. Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.
2. Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.
- 61.
Panel Report, Canada – Pharmaceutical Patents, WT/DS114/R, adopted 7 April 2000, at paras 7.25-7.26.
- 62.
UN, Vienna Convention on the Laws of Treaties, 1155 UNTS 331, 8 ILM 679 (adopted on 23 May 1969, entered into force 27 January 1980).
- 63.
See Frankel (2006), pp. 365–431.
- 64.
WTO Ministerial Conference, ‘Declaration on the TRIPS Agreement and Public Health’, Fourth Session, Doha [WTO Doc. WT/MIN(01)/DEC/2, 2001], at para. 5(a) provides that “In applying the customary rules of interpretation of public international law, each provision of the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles”.
- 65.
That Articles 7 and 8 cannot result in exceptions not envisaged during the negotiation of TRIPS is clear from Article 8 and the requirement that any measures taken be “consistent with the provisions of this Agreement”; see Gervais (2012), at para. 2.123. See also Van den Bossche (2008), at p. 745, “.… the provision in Article 8 is limited by the requirement that measures falling there under be consistent with the provisions of the TRIPS Agreement. Thus, rather than creating an exception from TRIPS disciplines for measures serving public policy objectives, Article 8 is best seen as enunciating a fundamental principle of the TRIPS Agreement to be taken into account, with Article 7, when interpreting and applying its remaining provisions” (italics in original).
- 66.
Consistently with the overall patent acquis and Vienna Convention on the Laws of Treaties (supra note 62).
- 67.
- 68.
On the calibration narrative, see Gervais (2007), pp. 3–59.
- 69.
Frankel (2009), pp. 1023–1065.
- 70.
Dinwoodie and Dreyfuss (2012).
- 71.
WTO Panel, United States – Section 110(5) of the US Copyright Act, WT/DS160/R, adopted 27 July 2000, at FN 85.
- 72.
Ibid. See also Canada – Patent Protection of Pharmaceutical Products, WT/DS114/R, adopted 7 April 2000, at para. 7.15, which states that “As a consequence of the extended context that has to be taken into account when interpreting provisions of the TRIPS Agreement, the Panel, in considering the negotiating history of the TRIPS Agreement, concluded that interpretation may go beyond the negotiating history of the TRIPS Agreement proper and also inquire into that of the incorporated international instruments on intellectual property”.
- 73.
See MacQueen et al. (2008), at paras 10.12–10.13.
- 74.
- 75.
- 76.
Reichman (2010), at p. 591 (emphasis added).
- 77.
- 78.
Blakeney (1996), at para. 3.08.
- 79.
Gervais (2012), at para. 2.123.
- 80.
Blakeney (1996), at para. 3.08.
- 81.
Correa (2000), at pp. 93 and 100.
- 82.
Cotropia (2008), at p. 560.
- 83.
Ibid.
- 84.
Discussed by Reichman (2010), at p. 603.
- 85.
See also Goyal, supra note 57.
- 86.
Ibid., at pp. 614–618.
- 87.
Gervais (2012), at para. 2.113.
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Frankel, S., Lai, J.C. (2015). Recognised and Appropriate Grounds for Compulsory Licences: Reclaiming Patent Law’s Social Contract. In: Hilty, R., Liu, KC. (eds) Compulsory Licensing. MPI Studies on Intellectual Property and Competition Law, vol 22. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-54704-1_8
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