Compulsory patent licensing during a pandemic

The role of compulsory licensing resembles that of a guardian hidden in patent law. Compulsory patent licenses “remind” us all of the importance of free negotiation between the relevant parties, allowing public bodies to exercise monitoring duties in response to certain needs. The COVID-19 crisis has changed the situation, and the resulting international initiatives have brought compulsory licensing to the front line.

Origins and characteristics

The former Spanish Patents Act already provided for compulsory licensing. However, its wording was slightly amended partly by virtue of Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The newly worded provisions are now included in the current Act 24/2014, of July 24, on Patents (“LP 2015”).

LP 2015 carefully examines the defining features of compulsory licensing. Under the LP 2015, aside from any provisions applicable to agreed licensing, compulsory licenses: (i) must be non-exclusive; (ii) are subject to “appropriate remuneration based on the circumstances of each case, having regard to the invention’s economic impact,” and (iii) require the rights-holder or patentee to cooperate in good faith as well as to transfer to the licensee the know-how related to the invention (Article 100).

The LP 2015 also lays down the following grounds for compulsory licensing(Articles 91 to 96):

• Failure to work or insufficient working (or exploitation) of a patented invention within four years of the patent publication in the Official Gazette of Industrial Property.
• Dependent patents, or patents and plant varieties, seeking not to undermine prior rights. The holder of the second patent must provide evidence that his/her invention or plant variety involves “an important technical advance of considerable economic significance,” and that he/she tried to negotiate (unsuccessfully) with the holder of the first patent.
• Manufacture of pharmaceutical products for export to countries with public health problems, subject to Regulation (EC) No. 816/2006 of the European Parliament and of the Council, of May 17, 2006, on this matter.
• The need to remedy anticompetitive practices, upon the issuance of (i) a final and unappealable administrative or judicial decision, or (ii) a royal decree when the government finds grounds of public interest to end these anticompetitive practices.
• Public interest, construed so as to cover the following situations:

“a) Where initiating, increasing or generalizing the invention’s exploitation, or improving the conditions under which such exploitation is carried out, are of utmost importance for public health or national security.

b) Where the lack or insufficiency of exploitation, whether in terms of quality or quantity, causes serious prejudice to the country’s economic or technological development.

c) Where national supply needs so require” (Article 95(2) LP 2015, emphasis added)

If the government finds grounds of “public interest,” on the motion of the Ministry of Industry, Energy and Tourism, it should enact a royal decree formulated in cooperation with the minister responsible for health matters.

Compulsory licensing in the public interest

This instrument has not been applied within the Spanish industry. Between 1986 and 2010, six compulsory license applications were filed; all of them were either rejected or stayed. In addition, in 2015, under circumstances that completely differ from the current situation, there was a proposal to request a compulsory license for a rights-holder’s patent for hepatitis C treatment based on grounds of public health. The proposal referred (i) to the high price of this medicine, €43,000 in Spain, and (ii) the large number of hepatitis C patients, 700,000, in 2015. Ultimately, the proposal was dismissed.

Compulsory licenses, and particularly those based on “grounds of public interest,” evidence the delicate balance between ownership rights and their underlying social purpose. This social purpose is an inherent limit to the exclusivity attached to the rights to industrial and intellectual property (rights-holders’ private interests compared to the public interest).

Given the situation triggered by COVID-19: are there grounds of “utmost importance for public health” to grant a compulsory license on a patent in force? So far, some international authorities apparently think there are:

• The Canadian House of Commons has passed a bill expediting the compulsory licensing system. Compulsory licenses will now be granted on grounds of a “public health emergency” prior to any negotiation on terms and conditions (remuneration, for instance) with the patentee.
• The Chilean Lower Chamber has adopted a draft decision for the granting of non-voluntary licenses in light of the COVID-19 outbreak and the health risks posed by this pandemic. This draft aims at facilitating access to vaccines, medicines, diagnostic kits, devices, supplies and other technology on grounds of public health or national emergency.
• Israel’s Ministry of Health has granted a permit to the state for the exploitation of a patent in force for the sole purpose of treating COVID-19 patients, in the interest of maintaining the country’s essential supplies and services.

Authors: Marta Zaballos and Raúl Pérez