The Complexity of Compulsory Licensing System

Intellectual property is a complex issue. People create inventions and intellectual works and sometimes, after this challenging period of work or inspiration, they often seek legal protection. Then, the creators enter the world of intellectual property, full of rules and requirements. Some of them seem contradictory, such as the compulsory licensing system. Most people know intellectual property protects inventors or creators from unauthorized use. Compulsory licenses, in contrast, let others use a third party’s intellectual property rights.

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Compulsory licenses allow others to exploit protected inventions, limiting the owner´s rights. Compulsory licenses are crucial in the case of patents. Patents are exclusive rights granted by a state to encourage innovation. In most cases, patents benefit society, so governments have set up patent systems worldwide. But sometimes, patents can harm society.

Patent owners can harm society in several ways. Patent owners can use their patents as instruments to hurt free competition. For example, a person might acquire a dominant position in a specific market thanks to a patent. This dominance can impose high prices to exclude competitors.

Sometimes, however, patent owners cannot negotiate licenses at an affordable price. This situation can exclude many people from using a technology. The case worsens when this technology, such as a pandemic, is crucial for human life or safety. Accessing medicine was problematic during the Covid-19 pandemic medicine. This difficulty was due to production bottlenecks, shortages of raw materials, and access to patented technology. According to patent regulations, licensing is the principal way of using others´ patented technology. Licensing is an agreement between a patent owner and a technology user. Free will is an essential license element, as in any other contract. Without free will, there is no contract.

An exception to the free will requirement is the compulsory licensing system. In this circumstance, an authority or judge replaces the owner´s will by licensing others with the protected technology. This license is crucial in national emergencies when authorities need a quick response. Negotiating a license is often complex and can last months. Patent owners try to obtain the best possible conditions and, obviously, will not agree to any condition.

Harmonizing compulsory licensing systems is far from our situation; different countries have diverse regulations. For example, federal laws have long regulated governmental use in the United States. Governmental use lets the federal government utilize any technology patented in the United States without the authorization of the patent owner. This mechanism is automatic. Federal government, and companies working for the federal government do not need permission from the patent owner. They can use any patented product or process. The situation is different in most European countries. European governments need to obtain judicial authorization before using a protected technology. They do not have the option to use patents without an owner´s will. In addition, different European countries have different rules in a single market.

The European Commission is trying to set up a Union Compulsory License at the European Union level. This effort faces the opposition of big pharma, an economic engine in countries such as Germany and Switzerland.