Compulsory Patent License

A compulsory license allows use of a patented invention without the patent owner's consent: DEFINITION: a license granted by a government authority that permits a third party (or the government itself) to use a patented invention without the patent owner's authorization, in exchange for reasonable compensation; the patent owner retains the patent — they do not lose it; they simply cannot block the specific authorized use; INTERNATIONAL FRAMEWORK — TRIPS AGREEMENT (1994): the Agreement on Trade-Related Aspects of Intellectual Property Rights sets minimum IP standards for all WTO members; Article 31 — OTHER USE WITHOUT AUTHORIZATION OF THE RIGHT HOLDER: WTO members may permit compulsory licensing under the following conditions: (a) authorization shall be considered on its individual merits; (b) prior negotiation required — the proposed user must have made efforts to obtain authorization on reasonable commercial terms (this requirement may be waived in national emergency or urgent circumstances, or for public non-commercial use); (c) scope limited to purpose for which it was authorized; (d) non-exclusive; (e) non-assignable except with the enterprise; (f) predominantly for domestic supply; (g) licensee pays adequate remuneration; (h) legal validity subject to judicial review; (i) remuneration subject to judicial review; TRIPS ARTICLE 31 PERMITTED GROUNDS: national emergency or other circumstances of extreme urgency; public non-commercial use; to remedy anti-competitive practices; prior art deposits when compulsory license is sought for semiconductor technology: limited to public non-commercial use or anti-competitive practices; PARIS CONVENTION (1883) ARTICLE 5A: first international recognition of compulsory licensing; required member states to permit compulsory licenses to prevent abuse of patent rights (including non-working); TRIPS overrides Paris Convention for WTO members in key respects.

The Doha Declaration was a landmark reinterpretation of TRIPS for developing countries: THE DOHA DECLARATION ON TRIPS AND PUBLIC HEALTH (November 2001): WTO Ministerial Conference declaration affirming that TRIPS should be interpreted to support public health; KEY AFFIRMATIONS: (1) TRIPS does not prevent WTO members from taking measures to protect public health; (2) members have the right to grant compulsory licenses and freedom to determine the grounds for compulsory licenses; (3) members have the right to determine what constitutes a 'national emergency'; (4) least-developed country members are not obligated to protect pharmaceutical patents until at least 2033 (extension from 2016); THE PARAGRAPH 6 PROBLEM: TRIPS Article 31(f) requires that compulsory licenses be predominantly for supply of the domestic market; this created a problem for developing countries with little or no pharmaceutical manufacturing capacity — they could issue a compulsory license but couldn't get anyone to make the drugs for them; the Doha Declaration acknowledged this problem and required a solution; TRIPS AMENDMENT — ARTICLE 31BIS (2017, first substantive TRIPS amendment): allows developed-country members to produce and export generic medicines under compulsory license to eligible importing countries; importing country must notify the TRIPS Council of the product and quantity; no exclusive supply to one country; eligible importing countries: LDCs; any developing country that notifies incapacity to manufacture; USE IN PRACTICE: Canada's Export Compulsory License (Jean Chrétien Pledge to Africa, 2004): first use of Article 31bis framework; Canada licensed generic versions of AIDS drugs for export to Rwanda; US POSITION: the US typically opposes invocation of compulsory licensing by other countries but accepts Article 31bis for LDCs; EXAMPLES OF ACTUAL COMPULSORY LICENSES ISSUED: Brazil (2007): efavirenz (HIV/AIDS drug by Merck); 'national interest' ground; government issued compulsory license; produced generic version locally; saved ~72% on drug cost; Thailand (2006-2008): efavirenz; Kaletra; Plavix; 'government use' licenses; India (2012): Nexavar (sorafenib, Bayer); Section 84 of Indian Patents Act (not worked; not reasonably available; not at reasonable price).

Section 1498 is the US government's built-in patent license: 28 U.S.C. § 1498 — AUTHORIZATION AND CONSENT: 'Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture'; KEY FEATURES: AUTOMATIC AUTHORIZATION: the US government can use any patented invention without the patent owner's permission; EXCLUSIVE REMEDY: the patent owner cannot get an injunction, cannot sue the infringing contractor, and cannot get enhanced damages; the only remedy is 'reasonable and entire compensation' in the Court of Federal Claims; 'FOR THE UNITED STATES': use by a government contractor is covered if it is 'for the United States' — i.e., authorized or consented to by the government; the government must affirmatively authorize or consent to the contractor's use; DEFENSE PROCUREMENT: historically used most heavily in defense procurement; weapons systems; military technology; defense contractors benefit from § 1498 government authorization in contracts; COVID-19 AND § 1498: during COVID-19, academics and advocates urged the US government to invoke § 1498 for vaccines and treatments; the US government ultimately did not exercise this power for COVID vaccines; critics argued this was a missed opportunity to lower vaccine prices globally; COMPENSATION STANDARD: reasonable and entire compensation = roughly equivalent to a reasonable royalty; courts use Georgia-Pacific factors adapted for government use; no enhancement for willfulness; PATENTS vs. COPYRIGHTS: § 1498(b) covers copyright infringement by the government on similar terms; INTERNATIONAL COMPARISON: § 1498 is effectively the US version of the government-use compulsory license permitted under TRIPS Article 31(b) ('public non-commercial use').

March-in rights are a form of compulsory licensing for federally funded inventions: BAYH-DOLE ACT § 203 (35 U.S.C. § 203) — MARCH-IN RIGHTS: when a small business or university develops an invention with federal funding and elects to retain title under Bayh-Dole, the government retains march-in rights; the federal funding agency can require the patent owner to grant licenses to responsible applicants on reasonable terms; GROUNDS FOR MARCH-IN: the agency can march in if: (1) the contractor has not taken effective steps to achieve practical application of the invention; (2) action is necessary to alleviate health or safety needs not reasonably satisfied by the contractor; (3) action is necessary to meet requirements for public use specified by federal regulation; (4) the contractor is not meeting US manufacturing preference requirements (§ 204); WHO HAS MARCH-IN RIGHTS: only the federal agency that funded the research; not the general public; not state governments; not Congress; HAVE MARCH-IN RIGHTS EVER BEEN EXERCISED?: NO — as of 2026, the federal government has never once successfully exercised march-in rights despite multiple petitions; KEY PETITIONS DENIED: Ritonavir (Abbott Laboratories HIV drug): NIH denied march-in petition (2004); Xalatan (Pfizer glaucoma drug): NIH denied march-in petition (2004); Norvir (Abbott): NIH denied march-in petition (2004); COVID-19 mRNA vaccines (Moderna): NIH received petitions in 2022-2023; pending at time of writing; the agencies have consistently held that high prices alone do not justify march-in — the statute requires failure to 'achieve practical application,' not merely high pricing; BIDEN ADMINISTRATION (2023): issued guidance stating that high drug prices could be a factor in march-in analysis; TRUMP ADMINISTRATION (2025): reversed Biden guidance; returned to prior position that march-in is not a price-control tool; POLICY DEBATE: march-in rights are highly contested; pharma industry argues march-in for pricing would deter investment in federally funded research; public health advocates argue it is needed to control drug prices on taxpayer-funded inventions.

Compulsory licensing procedures vary significantly by country: INDIA — SECTION 84 OF THE PATENTS ACT: any person may apply for a compulsory license after 3 years from patent grant if: (a) the reasonable requirements of the public with respect to the patented invention have not been satisfied; (b) the patented invention is not available to the public at a reasonably affordable price; (c) the patented invention is not worked in the territory of India; SECTION 92: central government can issue compulsory license for national emergency or extreme urgency or public non-commercial use without the 3-year wait; SECTION 100: government use license; INDIA'S NEXAVAR DECISION (2012): Natco Pharma filed for compulsory license on Bayer's Nexavar (sorafenib tosylate; kidney/liver cancer); Bayer's price: ~$69,000/year; local price needed: ~$2,800/year; Natco's price with compulsory license: ~$176/year; Indian Patent Office granted the license; landmark case demonstrating that developed-country pharmaceutical patents are subject to compulsory licensing in India; GERMANY — SECTION 24 PATENTGESETZ: compulsory license for national emergency or public interest; court-ordered; applicant must have tried to obtain voluntary license; EUROPEAN GENERAL FRAMEWORK: most EU countries have compulsory licensing statutes; limited to government use and national emergency grounds in practice; CHINA — PATENT LAW ARTICLE 48: compulsory license available for: failure to work (3 years after grant); national security or public interest; anti-competitive practices; must offer voluntary license first on reasonable terms; COMPENSATION STANDARDS GLOBALLY: TRIPS requires 'adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization'; WHO GUIDELINES: suggest 4% of net selling price in developing countries as a reasonable royalty for pharmaceutical compulsory licenses; US (§ 1498): 'reasonable and entire compensation' — courts have approved rates from 0.5% to ~10% depending on the technology; no single global standard exists — each compulsory license is negotiated or adjudicated under national law.