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Prior Negotiation and Remuneration for Patent Compulsory Licensing: Practice, Problem, and Proposal

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Compulsory Licensing

Part of the book series: MPI Studies on Intellectual Property and Competition Law ((MSIP,volume 22))

Abstract

Opinions vary on the nature of prior negotiation, as well as the meaning of adequate remuneration for CL under Art. 31 of the TRIPS Agreement. A review of the historical negotiating process and current practice in different jurisdictions shows that “prior negotiation”, designed as a procedure to protect patent holders, is interpreted differently among WTO members due to the ambiguity of the TRIPS Agreement. Art. 31 of the TRIPS Agreement leaves great flexibilities for WTO members to qualify the requirement for “prior negotiation”. Moreover, the TRIPS Agreement does not specify the meaning of “adequate remuneration” for CL. This chapter argues that WTO members enjoy great flexibilities to determine the adequate remuneration and the purpose of CL, as opposed to other circumstances, which deserves particular consideration. Also, the rules and procedures for setting remuneration for CL should be easy to predict. It is advisable for WTO members to adopt specific rules on determining the “reasonable commercial terms” and “reasonable period of time”. This chapter further examines the existing methods to assess the remuneration for CL of pharmaceutical patents, arguing that the well-recognised guidelines proposed by the UNDP and the WHO could serve as guidance for setting the CL royalty in developing countries.

X. Lin is Professor of Law.

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Notes

  1. 1.

    See the chapter “Compulsory Licences: Law and Practice in Thailand” by Jakkrit Kuanpoth, in this volume.

  2. 2.

    Application for Compulsory Licence under Section 84 (1) of the Patent Act 1970 in Respect of Patent No. 215758, Compulsory License Application No. 1, 2011. For more details, see the chapter “Compulsory Licence under Indian Patent Law” by N.S. Gopalakrishnan and Madhuri Anand, in this volume.

  3. 3.

    Some unsuccessful attempts have been made to seek a CL related to drugs for hepatitis B, tuberculosis, and AIDS in China. For instance, in 2008, a public interest organisation, Beijing Yirenping Center, together with 1,843 HBV carriers and HIV-infected persons, appealed to the Ministry of Commerce to issue CL for Lamivudine. In July 2011, Shanghai Aurisco Pharmaceutical Limited planned to organise domestic non-governmental organisations to apply for patent CL for Tenofovir disoproxil used for AIDS. http://www.chinaipr.gov.cn/newsarticle/news/government/201203/1285090_1.html.

  4. 4.

    Li et al. (2008), pp. 1034 and 1043.

  5. 5.

    WIPO CDIP (Committee on Development and Intellectual Property) (2010), p. 15, Sec. 49.

  6. 6.

    Liu (2009), pp. 115 and 121–122.

  7. 7.

    Art. 48 (1) regulates the CL on the ground of “failure to work” a patent.

  8. 8.

    Art. 51 deals with the CL on the ground of ‘dependent patents’.

  9. 9.

    Lin (2006a, b).

  10. 10.

    Submission by Japan, Addendum, Patents: Non-Voluntary Licences, MTN.GNG/NG11/W/17/Add. 3, sec. 2 (1).

  11. 11.

    MTN.GNG/NG11/17, p. 18, para. 39. 23 January 1990.

  12. 12.

    MTN.GNG/NG11/W/32/Rev. 2, p. 100.

  13. 13.

    MTN.GNG/NG11/W/32/Rev. 2, p. 102.

  14. 14.

    Draft Agreement on Trade-related Aspects of Intellectual Property Rights, MTN.GNG/NG11/W/68, p. 9, 29 March 1990.

  15. 15.

    In Bayer v. Union of India and Others, the compulsory licence applicant, Natco, had sent a request letter to the patent holder, Bayer, for a licence, and the same was not appreciated by Bayer.

  16. 16.

    Bayer Corporation v. Union of India, The Controller of Patents and Natco Pharma Limited, MANU/IC/0016/2013, paras. 10–16.

  17. 17.

    Art. 11, 15 March 2012.

  18. 18.

    Treitel (1995), pp. 8–10.

  19. 19.

    The Controller General of Patents Designs and Trademarks of India (“Controller”) granted Natco Pharma Limited (“Natco”), an Indian drug manufacturer, a CL to manufacture Bayer’s patent drug—Nexavar (Sorafenib). Bayer appealed, and the Intellectual Property Appellate Board upheld the Controller’s decision. Application for Compulsory Licence under Section 84 (1) of the Patent Act 1970 in Respect of Patent No. 215758, Compulsory License Application No. 1, 2011.

  20. 20.

    MTN.GNG/NG11/W/32/Rev. 2, p. 100.

  21. 21.

    UNCTAD-ICTSD: Resource Book on TRIPS and Development [M/OL], p. 469, http://www.iprsonline.org.

  22. 22.

    UNCTAD-ICTSD: Resource Book on TRIPS and Development [M/OL], p. 470. http://www.iprsonline.org.

  23. 23.

    Application for Compulsory Licence under Section 84 (1) of the Patent Act 1970 in Respect of Patent No. 215758, Compulsory License Application No. 1, 2011, pp. 9–10.

  24. 24.

    Ibid.

  25. 25.

    Application for Compulsory Licence under Section 84 (1) of the Patent Act 1970 in Respect of Patent No. 215758, Compulsory License Application No. 1, 2011, pp. 55–62.

  26. 26.

    UNCTAD-ICTSD: Resource Book [M/OL], p. 470, http://www.iprsonline.org.

  27. 27.

    Submission by Japan, “Addendum, Patents: Non-Voluntary Licences”, MTN.GNG/NG11/W/17/Add. 3, sec. 2 (1).

  28. 28.

    UNCTAD-ICTSD: Resource Book on TRIPS and Development [M/OL], p. 470, http://www.iprsonline.org.

  29. 29.

    Explanation 1, Art. 84 (6)(iv).

  30. 30.

    Art. 40, Law on Industrial Property No. 20-00 of 18/04/2000, see WIPO CDIP/5/4, Annex I, p. 48, 2010.

  31. 31.

    Love (2001).

  32. 32.

    Sun (2003), p. 3.

  33. 33.

    Nolff (2002), p. 3.

  34. 34.

    Resource Book, p. 471.

  35. 35.

    Resource Book, p. 471.

  36. 36.

    Resource Book, p. 471.

  37. 37.

    Patent Law, as amended in 2008, Art. 48 (2).

  38. 38.

    Art. 17, China’s Anti-Monopoly Law, 2007.

  39. 39.

    The draft is still in the process of consultation.

  40. 40.

    Israel Patent Law no. 5727 of 08/08/1967, Art. 119. WIPO CDIP/5/4, Annex I, 2010, p. 95.

  41. 41.

    MTN.GNG/NG11/W/32/Rev. 2, pp. 98–103.

  42. 42.

    MTN.GNG/NG11/W/32/Rev. 2, p. 98.

  43. 43.

    Välimäki (2011), p. 1.

  44. 44.

    Resource Book, p. 475.

  45. 45.

    Resource Book, p. 476.

  46. 46.

    Resource Book, p. 476.

  47. 47.

    Taubman (2008), pp. 927 and 956.

  48. 48.

    Taubman (2008), pp. 927 and 956.

  49. 49.

    Taubman (2008), pp. 927–970; Oxford University p. 956.

  50. 50.

    Art. 30 of the TRIPS Agreement.

  51. 51.

    Taubman (2008), p. 957.

  52. 52.

    Although this argument focuses on the CL of patented drug, it is equally applicable to other patented products.

  53. 53.

    Välimäki (2011), p. 17. Taubman (2008), pp. 953–954.

  54. 54.

    In Georgia-Pacific Corp. v. United States Plywood Corp., 318 F Supp 1116, 6 USPQ 235 (SD NY 1970), the court used these 15 factors to determine the monetary payments that would compensate for a patent infringement: (1) royalties the patentee receives for licensing the patent in suit; (2) rates the licensee pays for use of other patents comparable to the patent in suit; (3) nature and scope of licence in terms of exclusivity and territory/customer restrictions; (4) licensor’s established policy and marketing program to maintain patent monopoly by not licensing others to use the invention; (5) commercial relationship between licensor and licensee, such as whether they are competitors or inventor and promoter; (6) effect of selling the patented specialty in promoting sales of other products of the licensee, existing value of the invention to the licensor as a generator of sales of his non-patented items, and extent of such derivative or convoyed sales; (7) duration of patent and term of licence; (8) established profitability of the products made under the patent, its commercial success, and its current popularity; (9) utility and advantages of patent property over old modes and devices; (10) nature of the patented invention, character of the commercial embodiment of it as owned and produced by the licensor, and benefit of those who have used the invention; (11) extent to which the infringer has made use of the invention and the value of such use; (12) portion of profit or selling price customarily allowed for the use of the invention; (13) portion of realizable profit attributable to the invention as distinguished from non-patented elements, significant features/improvements added by the infringer, the manufacturing process, or business risks; (14) opinion testimony of qualified experts; (15) outcome from hypothetical arm’s-length negotiation at the time infringement began.

  55. 55.

    Reichman (2003).

  56. 56.

    Application for Compulsory Licence under Section 84 (1) of the Patent Act 1970 in Respect of Patent No. 215758, Compulsory License Application No. 1, 2011, pp. 5–60.

  57. 57.

    Chatterjee.

  58. 58.

    Application for Compulsory Licence under Section 84 (1) of the Patent Act 1970 in Respect of Patent No. 215758, Compulsory License Application No. 1, 2011, p. 60.

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Authors and Affiliations

  1. Intellectual Property Research Institute, Law School, Xiamen University, Xiamen, Fujian Province, P. R. China

    Xiuqin Lin

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  1. Max Planck Institute for Innovation and Competition, Munich, Germany

    Reto M. Hilty

  2. Institutum Iurisprudentiae Academia Sinica, Taipei, Taiwan

    Kung-Chung Liu

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Lin, X. (2015). Prior Negotiation and Remuneration for Patent Compulsory Licensing: Practice, Problem, and Proposal. 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_9

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