Compulsory Licenses – Legal obligation to exploit the patented invention

A patent is an industrial property title that protects an invention for 20 years and grants an exclusive right to its owner. In return for the payment of a fee and the publication of the invention, the patented invention can be exploited directly or licensed to third parties. Either way, the owner cannot refrain from exploiting the patented invention. On the contrary, as already mentioned when we discussed licenses of full rights, there is a legal obligation to exploit the patented invention (Article 90 of Spanish Patent Law 24/2015 of July 24, 2010 [hereinafter “SPL” or “Patent Law”]).

Title IX of the Patent Law introduces with a somewhat harsh tone the general principle that not any exploitation of the patented invention is valid, specifying that it must be sufficient “to meet the demand in the Spanish market”, in Spain or in another member state of the World Trade Organization (WTO). The burden of proof regarding the level of exploitation of the invention rests on the patent holder, and if such does not begin within four years from the date of filing of the patent application (or three years from the date of publication of its grant), any interested party could request the grant of a compulsory license.

However, upon further reading of the law, we realize that the legislator actually does seems to be aware of how difficult it can be to exploit a patented invention, and consequently provides that compulsory licenses will not be granted in case there are “objective difficulties of a legal technical nature, beyond the control and the circumstances of the owner of the patent, which make the exploitation of the invention impossible or which prevent that exploitation from being greater than it is” (the “legitimate excuses”).

The non-existent or insufficient exploitation is not the only reason for granting compulsory licenses; they can also be imposed for “reasons of public interest” or in order to “remedy anti-competitive practices”. Another relevant case occurs when it is impossible to exploit a patented invention without infringing the rights conferred by another prior patent or plant variety right (PVR). In this circumstance, the holder of the later patent can request a compulsory license for exploiting the subject matter of the previous patent or PVR (so-called compulsory dependence licenses).

Requests for compulsory licenses must be submitted to the SPTO and, except in some specific cases (e.g. a national emergency), the applicant must demonstrate that, prior to the request, he has unsuccessfully tried to obtain a “contractual license on reasonable commercial terms and conditions”.
Compulsory licenses are usually neither exclusive nor free. The remuneration must be adapted to the circumstances of the specific case, also taking into account the economic importance of the invention. Relations between the parties (the patent holder and the licensee) in the context of a compulsory license must be based on the principle of good faith.

This implies, for example, that the patent holder has to provide the licensee with the necessary know-how that enables him to exploit the invention properly. If the patent holder violates the principle of good faith, the licensee could obtain a reduction in the license fee. Similarly, the licensor may request the cancellation of the compulsory license if the licensee infringes the principle of good contractual faith.

Cases of compulsory licensing are rare as their application to the real world is complex, and often they are only considered feasible in the health sector. In fact, in a recent case in Germany, the Supreme Court of Karlsruhe imposed a compulsory license for the use of drugs which were useful to relieving people infected with the HIV virus. Despite the fact that the interested party had only made one attempt to obtain the license and had offered to pay a much lower amount than the price expected by the holder, the Supreme Court was lenient and approved the compulsory license.

The interesting thing about this decision is that, after highlighting the exceptional nature of compulsory licensing, it attempts to provide more clarity on the concept of “public interest” (the scope of which is often difficult to determine) by stating that the mere fact that a group of people using a medicine is small is not in itself sufficient to exclude the existence of a public interest.

Sometimes, the weighing of all the circumstances of a specific case may lead to the conclusion that, exceptionally, the public interest factor related to a license to an interested party is so important that the rights of the patent holder have to take second place.

This is the case, for example, when a drug intended for curing or treating serious illnesses is shown to have therapeutic properties where other drugs available on the market do not have any, or not sufficiently enough, or have serious side effects. Likewise, compulsory licensing is not possible when essentially comparable alternatives exist that are suitable for meeting public needs.