What is compulsory licensing?
The grant of a Compulsory License means that government allowed someone else to produce the patented product or process without the consent of the patent owner.
Under the Andean Community provisions, a Compulsory License may be granted only
- Three years after the grant of the patent, or four after the application for it (whichever is the longest); or
- Where the working of the invention has been suspended for more than a year.
Due to the following conditions:
- At the time of request, the owner of the Patent hasn’t complied with his obligations as provided in the member country in which the license is applied for; or
- Where the working of the invention has been suspended for more than a year.
The competent national office may grant a compulsory license for the industrial manufacture of the product to which the patent relates, or for the use of the patented process.
A compulsory license is granted by the competent national office at the request of any interested party. However, the owner can provide legitimate reasons for his failure to act, which may be reasons of force majeure in accordance with the domestic provisions of each member country. In that case, the compulsory license shall not be granted.
A compulsory license shall only be granted where the person who requests it has previously attempted to obtain a contractual license from the owner of the patent on reasonable commercial terms and conditions, and where that attempt has not had any effect within a reasonable time.
A Compulsory License…
- Shall not be exclusive, and no sublicense may be granted
- May only be transferred with the part of the enterprise or its intangible assets that enable them to be worked; the transfer shall be evidenced in writing and registered with the competent national office. Otherwise, it shall be devoid of legal effect.
- When the circumstances that gave rise to the Compulsory License no longer remain and are unlikely to recur, it may be revoked, subject to the adequate protection of the legitimate interests of the persons who have been authorized under them.
- Its scope and duration shall be limited, according to the purposes for which they have been granted.
- In the case of patents for invention that protect semiconductor technology, the compulsory license shall be granted only for public, non commercial use or to remedy or rectify a practice declared contrary to free competition by the competent national authority, according to the corresponding dispositions.
- Shall provide for adequate remuneration according to the circumstances of each case, due regard being had to their economic value.
- Shall be used mainly to supply the domestic market.
The compulsory licenses that do not conform to the aforementioned provisions, or to the following ones, shall be devoid of legal effect.
Proceeding:
The grant of compulsory licenses shall proceed subject to notification of the owner of the patent, and within the following 60 days, he may present his arguments against the application if he wants to.
The competent national office shall determine the scope or extent of the license. In particular, it shall specify:
- The period for which it is granted;
- Its subject matter;
- The amount of the royalties, which shall be adequate, depending on the particular circumstances of each case. The economic value of the authorization must be specially considered; and
- The conditions for the payment thereof.
Challenges to the compulsory license:
A challenge to the compulsory license shall not prevent exploitation or have any effect on periods that have not expired. Its introduction shall not prevent the owner of the patent from charging, in the intervening period, the royalties specified by the competent national office in respect of the part not challenged.
The licensee shall be bound to exploit the invention within a period of two years following the date of grant of the license, unless he justifies his inaction with a claim of unforeseen circumstances or force majeure. If he fails to do so, the competent national office shall revoke the compulsory license at the request of the owner of the patent.
Public interest and compulsory licenses:
On a declaration by a member country of the existence of public interest, emergency or national security considerations, and only for as long as those considerations remain, the patent may be made subject to compulsory licensing. In that case, the competent national office shall grant such licenses as may be applied for. The owner of the patent so licensed shall be notified where reasonably possible.
Conditions:
The competent national office shall specify the scope or extent of the compulsory license, and in particular:
- The term for which it is granted,
- Its subject matter, and
- The amount of royalties and the conditions for the payment thereof.
The grant of a compulsory license for reasons of public interest shall not diminish the right of the owner of the patent to continue to work the said patent.
Free competition and compulsory licenses:
A compulsory license shall be granted by the competent national office shall, either ex officio or at the request of a party, and after having obtained the consent of the national authority on free competition, where practices are noted that adversely affect free competition, especially an abuse by the owner of the patent of his dominant position on the market.
In such cases, when the amount of royalties is determined, due regard shall be given to the need to correct anti-competitive practices.
Where it is probable that the circumstances that gave rise to it could recur, the competent national office shall refuse to revoke the compulsory license.
Patents which require the use of another patent:
When the owner of a patent whose working requires the use of another has been unable to secure a contractual license on reasonable terms, he can request a compulsory license which the competent national office shall grant at any time.
That license shall be subject to the following rules, without prejudice of the rules mentioned above:
- The invention claimed in the second patent must embody substantial technological progress in relation to that claimed in the first
- The owner of the first patent shall have the right to a cross-license on reasonable terms for exploitation of the invention claimed in the patent; and
- The license under the first patent may not be assigned without the assignment of the second.
