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Compulsory Licensing On

Patents in the US, China,

Japan, Germany, and India

Presented by:

Jon Wood, Bridgestone Americas

Raj S. Dav, Morrison Foerster

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Introduction

Compulsory License

The government, rather than the patent

owner, grants a company a non-exclusive

license to make, use or sell the patented

technology

The government, not the patent owner, setsthe terms of the license, including the royalty

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Criteria for Compulsory LicensingPublic welfare

Non working of invention

Exploitation of an improvement invention

Publicwelfare

Nonworking

Improvementexploitation

US No No

No

China Yes Yes YesJapan Yes Yes Yes

Germany Yes No No

India Yes Yes No

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Compulsory Licenses

Why They Exist

To correct market failures

Generally considered good for society

Tempers the exercise of market powerDiscourages abuse of a patent

How They Are Obtained

Private party files an application to the government

Government reviews the application, and if

appropriate, grants the license

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Laws For Compulsory Licenses

InternationalTRIPS Article 31Non-Voluntary license to domesticproducers without authorization of the right holder

under national emergency or extreme urgency so

long as due process requirements are met

Paragraph 6 of the Doha Declaration

National (in many nations except the U.S.)Failure to work the patent

Public Interest Reasons (e.g., pharmaceuticals for a

public health emergency)

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The United States

General Rule No compulsory licensing regime,per se

Exceptions 28 U.S.C. 1498

Allows the U.S. to use an invention covered by a U.S. patentwithout license

Patent owners remedy is an action against the U.S. for recovery

of reasonable compensation

Federal Trade Commission Guidelines for Licensing of

Intellectual Property

Anti-trust

Merger/Acquisition

Certain U.S. laws (e.g., Clean Air Act)

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The United States, cont.

Overall

Compulsory licenses have rarely been

granted

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China

Compulsory licenses are only applicable toinvention patents and utility patents not designpatents

No compulsory license has been granted in China

Three situations where a compulsory licensecould be granted In case of unreasonable refusal to license

Public InterestNational emergency or an extraordinary state of affairs occurs

Exploitation of an improvement invention requiringlicense on the dominant patent

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China, cont.

If granted, a compulsory license must

Be non-exclusive

Pay a reasonable fee to the patentee, decided by both

parties through consultation

Be predominately for the supply of the domestic market only

Shall stipulate the scope and time for exploitation

Permitted judicial review of

Decision to grant or reject a compulsory license

Adjudication of the licensing fee

Decision to terminate a compulsory license

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Japan

Three instances where a compulsory license could

be granted Non-working patentee

Exploitation of an improvement invention requiringlicense on the dominant patent

Public interest

No compulsory license has been granted in Japan U.S. and Japan have an agreement not to issue a

compulsory license with regard to improved inventions,except for correction of unfair competition or approval ofpublic or non-commercial utilization

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Germany

Compulsory licensing in general

Public welfare

A national government can issue an order allowing

everybody to use the invention

User pays fee to the government, which then pays

a justified compensation to the patentee (not

necessarily all of the fees collected)

Requirements are very severe to grant compulsorylicense for the public welfare

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Germany, cont.

Conditions for compulsory licensing

A voluntary license must be denied

The patent must be granted

Public interest must be present Presumed if the use of the invention by a licensee has a

higher value compared with the interest of the patentee

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India

India has never granted a compulsory

license

India has not finalized the rules for the

Third Patent Amendments (2005), so

interpretation of the rules is a work in

progress

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India (cont.)The 2005 Amendments specify

A compulsory license may be granted after 3years of issuance of a patent if

The patent is not worked in India Is importation working?

Reasonable requirements of the public are notsatisfied

The patented invention is not available to the public at areasonable price

The patented products prejudice or harm existingdomestic trade or industry

The patented products fail to develop the market forexports

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India, cont.

Changes in compulsory licensing by the Patents

(Amendment) Act, 2005

Substantive

Applications claiming pharmaceutical inventions submittedbetween 1999 and 2005 will be subject to an automatic

compulsory license to generic companies if the generic

companies were producing the said drug prior to 2005 and

continue to produce the drug after the issuance of the patent

ProceduralCan only apply for a compulsory license if a voluntary license

cannot be obtained within 6 months from the start of

negotiations

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Summary

Despite detailed legislative guidelines, countries have littleexperience with compulsory licensing outside of the anti-trust area Perhaps the availability of compulsory licensing is sufficient to encourage

patentees to grant voluntary licenses

A country that grants compulsory licenses is likely to find its efforts topartner with companies in the future adversely affected, as it wouldcreate a less stable investment climate

Furthermore, it is questionable whether a compulsory license wouldreally be useful in the case of high-technological products Years of additional research results in trade secrets and undisclosed

information that the patent does not cover, which may be necessary toproduce a productive patented invention

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AcknowledgementsThe presenters acknowledge the valuable

contributions of the following co-authors: Ms. Susan Finston, formerly Vice President of

Pharmaceutical Association of America, President, FinstonConsulting, LLC

Ms. Zhongyi Tao, graduate student, Peking University LawSchool

Mr. Zheng Zha, attorney, Freshfields Bruckhaus Deringer,Beijing, China

Yukio Mr. Nagasawa, former Judge of Tokyo High Court,

and now with Abe, Ikubo & Katayama, Tokyo, Japan, alongwith Mr. Hirokazu Honda and Mr. Makoto Hattori

Mr. Heinz Goddar, partner, Boehmert & Boehmert, Munich,Germany.

Mr. Shaun Fox, law student, University of Akron