Patent Working

A patent working requirement obligates the patent holder to manufacture or commercially exploit the patented invention in the country that granted the patent: DEFINITION: working = actual local manufacture or genuine commercial exploitation of the patented invention within the country; the rationale: patents are granted in exchange for local industrial development, not just for the right to exclude; a patent that excludes all local use without any local benefit is contrary to the patent bargain; US POSITION: the US imposes NO working requirement; a US patent holder can enforce a US patent against importers and local manufacturers regardless of whether the holder manufactures in the US; under 35 U.S.C. § 271, making/using/selling/importing without authorization is infringement regardless of whether the patent holder works the invention; COUNTRIES WITH WORKING REQUIREMENTS: Brazil: Law 9.279/1996 (Industrial Property Law) Articles 68-74: patent holder must work the patent in Brazil within 3 years of grant; working = local manufacture or importation of the patented product; if not worked, the patent is subject to compulsory license; India: Patents Act Section 83-92: working requirements; the patent holder must file Form 27 annually disclosing working information; compulsory license can be granted if the patent is not worked in India on a reasonable commercial scale; China: Patent Law Article 48: compulsory license available if a patent that has been granted for 3+ years is not being worked; Indonesia, Argentina, and many other developing countries maintain working requirements; TRIPS FRAMEWORK: TRIPS Articles 27 and 31 permit working requirements but constrain the remedy: importation may satisfy working in many interpretations; compulsory license must meet procedural requirements (mostly for domestic purposes; adequate remuneration); PARIS CONVENTION: Article 5A(2): patents may be forfeited for failure to work only if compulsory licensing is insufficient to prevent the abuse.

TRIPS and the Paris Convention set limits on how countries can implement working requirements: TRIPS ARTICLE 27(1): patents shall be available and patent rights enjoyable without discrimination as to whether products are imported or locally produced; this language was intended to prevent working requirements that discriminate against imports; BUT: TRIPS Article 27(1) is ambiguous — does it mean importation always satisfies working?; DEBATE: developing countries (Brazil, India) argue that importation alone does not satisfy working; local manufacture may be required to fulfill the social contract of the patent system; TRIPS ARTICLE 31: compulsory licenses are permitted subject to conditions: (a) individual case basis; (b) prior negotiation for voluntary license (except national emergency); (c) predominantly for domestic supply; (d) adequate remuneration to the patent holder; (e) non-exclusive; (f) non-assignable; TRIPS ARTICLE 30: limited exceptions to patent rights permitted if they do not unreasonably conflict with a normal exploitation and do not unreasonably prejudice the legitimate interests of the patent holder; DOHA DECLARATION (2001): TRIPS flexibilities include compulsory licensing for public health; developing countries have maximum flexibility; TRIPS AMENDMENT (2017, Article 31bis): allows export of compulsory-licensed pharmaceutical products to countries without manufacturing capacity; PARIS CONVENTION ARTICLE 5A: patents may be forfeited for failure to work only if: compulsory licensing has been granted but has not prevented the abuse; forfeiture may not occur within 2 years of first compulsory license; at least 4 years from filing or 3 years from grant (whichever is later) must pass; PRACTICAL IMPLICATION: a US or EU company holding a patent in Brazil or India cannot simply export products and claim the patent is worked — local manufacture may be required; this significantly affects pharmaceutical, agricultural, and technology patent strategy in developing markets.

Brazil and India have the most developed and frequently invoked working requirement systems: BRAZIL: ARTICLES 68-74 OF LAW 9.279/1996: Article 68: a patent is subject to compulsory license if: (a) patent is not worked in Brazil within 3 years of grant; (b) working is discontinued for more than 1 year; (c) commercialization does not satisfy market needs; WHAT COUNTS AS WORKING: local manufacture in Brazil preferred; importation may satisfy working if local manufacture is not economically viable (controversial interpretation); Brazil has granted compulsory licenses for pharmaceutical patents: Efavirenz (HIV medication) in 2007 — Brazil declared a 'national interest' compulsory license; COMPULSORY LICENSE PROCEDURE: any person with a legitimate interest may petition INPI (Brazilian patent office); government may also issue directly for public interest; license is non-exclusive; remuneration to patent holder required; INDIA: PATENTS ACT SECTION 84-90: Section 84: any person can apply to Controller for compulsory license 3 years after grant if: (a) reasonable requirements of public not satisfied; (b) patent not available at reasonably affordable price; (c) patent not worked in India on commercially adequate scale; ANNUAL FORM 27: every patent holder MUST file Form 27 annually disclosing: whether the patent is being worked in India; quantum and value of working; statement of licences granted; failure to file Form 27 = criminal offense; BAYER v. NATCO PHARMA (2012): India's first compulsory license; Bayer's sorafenib (Nexavar) cancer drug; grounds: not worked in India; price unaffordable; royalty set at 6% of net sales; SECTION 83: working in India includes manufacturing in India — importation alone may not satisfy Section 84; SECTION 92: government can issue compulsory license for national emergency/public non-commercial use without prior negotiation with patent holder.

Patent holders must actively plan for working requirements when seeking protection in markets that impose them: LOCAL MANUFACTURING OPTIONS: establish manufacturing operations in the country; joint venture with local manufacturer — local partner manufactures under license; toll manufacturing — pay local manufacturer to produce products under patent; licensing to local companies: grant a license to a local company to manufacture; the licensee's working satisfies the patent holder's obligation; exclusive licenses to local manufacturers are common in Brazil and India for this purpose; WHAT CONSTITUTES WORKING IN DIFFERENT MARKETS: Brazil: local manufacture strongly preferred; importation may suffice if manufacturing is not economically feasible (controversial); India: working on commercially adequate scale; importation alone likely insufficient; China: broad exploitation including importation may satisfy Article 48 in practice; Argentina: local working required; DOCUMENTATION AND COMPLIANCE: India Form 27: annual filing mandatory; document production volumes; sales figures; licensing arrangements; Brazil INPI: be prepared to demonstrate working if challenged; keep records of local manufacturing or licensing activities; LICENSING STRATEGY: if local manufacture is not feasible, grant licenses to local manufacturers; structure the license to ensure working begins promptly (milestones; minimum manufacturing volumes); royalty rates in working licenses should reflect market value but must remain affordable (India Section 84(b) — affordable price requirement); PHARMACEUTICAL STRATEGY: voluntary licensing programs in advance of compulsory license threats; Medicines Patent Pool (MPP): voluntary pool for HIV, TB, HCV, COVID treatments in developing countries; acceptance = avoids individual country compulsory license challenges; PRICING STRATEGY: Brazil/India compulsory license risk is higher when prices are very high relative to local purchasing power; tiered pricing reduces compulsory license incentives while maintaining revenue in high-income markets.

The US patent system imposes no working requirement, creating a fundamental asymmetry with most of the world: US RULE: 35 U.S.C. § 271: infringement = making/using/selling/offering to sell/importing a patented invention without authorization; there is no requirement that the patent holder manufacture in the US; a US patent holder may: obtain injunctions against US importers of patented products regardless of whether the holder manufactures in the US; obtain damages for infringement regardless of domestic working; POLICY RATIONALE: US system treats patents as property rights independent of domestic production; critics argue this allows foreign patent holders to exclude US competition without contributing to US manufacturing; SECTION 337 ITC PROCEEDINGS: International Trade Commission can block imports that infringe valid US patents; notably: ITC requires domestic industry — the patent holder MUST have a domestic industry (manufacturing, licensing, R&D investment); ITC domestic industry can be satisfied by: substantial investment in R&D; substantial investment in licensing; manufacturing in the US; import exclusion orders are available even if patent holder does not manufacture the patented products; GLOBAL STRATEGY TENSION: US-based pharmaceutical companies hold patents in developing countries that impose working requirements; if the company manufactures only in the US or Europe, it may not satisfy local working requirements; options: export to satisfy working (arguable under TRIPS); license local manufacturers; join voluntary licensing pools (e.g., MPP); POLICY DEBATE: US advocates for elimination of working requirements in trade agreements; US-Mexico-Canada Agreement (USMCA): Article 20.40 — parties shall not require working as a condition of patent rights; TRIPS-plus provisions in US FTAs commonly prohibit working requirements beyond TRIPS Article 31 bounds.