The EU’s proposal on compulsory licensing regulation

In EU member states (MS), if an IP right is an obstacle against handling a crisis, it may be tackled by a so-called compulsory licence (CL). The CL forces a rights holder to let another entity use its technology. However, it is a last resort option, only available if a voluntary agreement proves impossible.

The nature of the CL stems from the principles set out in TRIPS, which aim to preserve the balance between incentives for innovation and the ability to ensure swift access to critical technologies in crises.

However, with some exceptions, CLs only serve the needs of the domestic markets because they are presently only available on a national basis; whereas many of today’s crises, such as COVID-19, are cross-border. Hence, on 27 April 2023 the Commission published its proposal for a regulation on EU-wide compulsory licensing for crisis management.

An EU tool

The proposal addresses cross-border crises within the EU, so it leaves the national CL systems untouched (subject to MS obligations to report on their national CLs), but proposes a “Union CL”, which would only be available if a crisis mode or an emergency mode is activated under one of the EU instruments listed in the annex to the proposal; i.e.:

1. Regulation (EU) 2022/2371 on serious cross-border threats to health,
2. Regulation (EU) 2022/2372 on a framework of measures for ensuring the supply of crisis-relevant medical countermeasures in the event of a public health emergency at Union level,
3. Regulation (EU) 2017/1938 concerning measures to safeguard the security of gas supply,
4. draft Regulation on Single Market Emergency Instrument, and
5. draft “Chips Act”.

Scope of the CL 

The EU CL may cover patents (i.e., national patents and European patents, including European Patents with unitary effect), but also published patent applications, utility models, and SPCs.

Moreover, as an IP licence can sometimes prove insufficient for manufacturing or offering certain “crisis-relevant products” due to regulatory data protection (especially under pharmaceutical laws), the proposal refers to the draft of a directive on the EU code relating to medicinal products for human use. This draft directive provides for the suspension of data exclusivity and market protection when a CL is issued to tackle a public health crisis.

Procedure

According to the proposal, the Commission would be solely authorised to grant CLs. But when considering granting a CL, it will have to consult one of the competent advisory bodies (listed in the annex to the regulation, or if needed, an ad hoc advisory body), that will advise on, inter alia, crisis-relevant information and identification of the relevant IP rights.

The Commission must also give the rights holder and the licensees a chance to comment on the options of a voluntary agreement, the need to grant the CL and its intended conditions, including the remuneration. The CL may only be granted once the relevant factors are considered.

The contents of the CL

According to the proposal, the CL must specify:

• the respective right (patent, patent application, SPC or utility model), but the non-proprietary name of the products may suffice if identification of the specific right would significantly delay the granting of the CL,
• the right holder (unless in cannot be identified with reasonable efforts given the urgency of the situation),
• the licensee,
• the duration of the CL, as well as
• the crisis-relevant product to be manufactured under the CL.

Licence fees

The CL will also have to indicate the remuneration of the rights holder (only exceptionally may it be specified after the grant). The remuneration should be adequate and determined considering criteria, such as the economic value of the licensed activities, public support granted to develop the invention, amortisation of development costs, and where relevant, the humanitarian aspects of granting the CL (not further explained in the proposal).

In any case, however, the remuneration is not to exceed 4% of the total gross revenue generated by the licensee under the CL.

The parties’ obligations

Given that a CL is an exception to the general principle of freedom to/not to contract, the licensee’s rights will be strictly limited. Only permitted activities relevant to the supply of crisis-relevant products in the EU market may  be…