European Commission publishes proposal for an EU regulation on the Compulsory Licensing of Patents
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In the wake of the COVID-19 crisis, the Proposed Compulsory Licensing Regulation aims to remediate the different approaches Member States have taken based on Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement). The fragmented national compulsory licensing systems create a risk of legal uncertainty both for IP rights holders and IP rights users. With the Proposed Compulsory Licensing Regulation, the Commission aims to (i) ensure access to crisis-relevant products when voluntary agreements do not work and (ii) provide the European Union (EU) with a harmonised and efficient compulsory licensing scheme.
The main takeaways of the Proposed Compulsory Licensing Regulation are the following:
- In crisis and emergency situations, the Commission is able to grant a compulsory license on patents, published patent applications, utility models and related supplementary protection certificates within the EU territory. This would allow for the supply of products that are essential to respond to a crisis, or to address the impact thereof, to the Member States. The (exhaustive) list of EU crisis instruments that can trigger a Union compulsory license are included in an Annex of the Proposal Compulsory Licensing Regulation.
- As to the conditions of the compulsory license, the Proposed Regulation stipulates that the Union compulsory license should (i) have a limited scope, duration and application and (ii) be granted in exchange for an adequate remuneration of the rights holder (which should not exceed 4% of the licensee’s turnover). A patent application that does not lead to a granted patent will require a refund of the remuneration.
- Prior to granting a Union compulsory license, the Commission will consult an advisory body on the need to issue a Union compulsory license. The Commission shall also notify the IP rights holder and the relevant licensee to allow them to comment on the possibility to reach a voluntary agreement, the need to grant such compulsory license and the granting conditions (including the amount of the adequate remuneration). Whereas the IP right holder can provide comments, its consent is not needed to proceed with the granting of the compulsory license.
- After balancing the interests considering the observations of the IP rights holder and existing national compulsory licenses, the Commission will grant the Union compulsory license through an implementing act.
- The Proposed Compulsory Licensing Regulation also imposes a number of obligations on the licensee. In particular, the licensee should be able to manufacture the relevant products or exploit the invention in way that is relevant in the crisis or emergency that the Union is facing. That means that the licensee must limit its activities to what is necessary to meet the needs of the Union. If the licensee fails to comply with its obligations under the Proposed Compulsory Licensing Regulation, the Commission may impose sanctions, such as e.g. terminating the license and imposing fines or periodic penalties.