Patents

Compulsory Licensing: The Patents and Trade Marks (World Trade Organisation) Regulations 1999

John Lambert

15 Aug 1999
This article first appeared on the Lancaster Buildings website
The Patents and Trade Marks (World Trade Organisation) Regulations 1999 (SI 1999 No 1899), which came into force on the 29 July 1999 implement the United Kingdom's obligations under the World Trade Organization ("WTO") and the Trade-Related Aspects of Intellectual Property Rights ("TRIPs") Agreements. They amend the provisions as to compulsory licensing by substituting a new s. 48 and inserting new s. 48A and s.48B into the Patents Act 1977, amending rules 68, 70 and 71 of the Patents Rules 1995.
Restrictions on Compulsory Licensing
Art. 27 of TRIPs requires patents to be available and patent rights to be enjoyable "without discrimination as to place of invention, the field of technology and whether products are imported or locally produced." The circumstances in which WTO members may authorize compulsory licences or other use of patents without the patentee's consent are restricted by art 31. That article requires, in particular, that

	applicants should have made efforts to obtain a licence from the patentee on reasonable commercial grounds without success within a reasonable period of time (para 31 (b));
	semiconductor technology should be excluded from the compulsory licensing provisions except for public non-commercial use or remedying an anti-competitive practice (para 31 (c));
	any such licences should be non-exclusive (para (d));
	they should be non-assignable except on the disposal of the goodwill of the licensee's business (para (e));
	such licences should be predominantly for the supply of the domestic market of the member concerned (para (f));
	proprietors should receive adequate remuneration taking into account the economic value of the licence (para (h)); and
	such licences should be limited in scope and duration to the purposes for which they were granted (para (c)).

It had been argued before the comptroller in Azrak-Hamway International Inc.'s Licence of Right (Design Right and Copyright) Application [1997] RPC 134 and Jacob J in Re Lenzing AG's European Patent (UK) [1996] EWHC Admin 390, [1997] RPC 245 that the Patents Act 1977 and the Copyright, Designs and Patents Act 1988 were incompatible with TRIPs. Such arguments failed in England because the hearing officer and the judge held that they had no jurisdiction to review those provisions. In Jacob J's view, the law was settled by the European Court's decision in International Fruit co. NV [1975] 2 CMLR 1 that the General Agreement on Tariffs and Trade was not directly applicable. A similar argument, however, was entertained in Ireland in Allen and Hanburys Ltd. v. Controller of Patents, Designs and Trademarks [1996] IEHC 59 (26th July, 1996) where Mella Carroll J decided that the compulsory licensing provisions of the Irish Patents Act were incompatible with TRIPs.
Former Provisions
S.48 of the Patents Act 1977 used to permit applications to the comptroller for compulsory licences under any one of the following grounds:

(a) where the patented invention was capable of being commercially worked in the United Kingdom, that it was not being so worked or was not being so worked to the fullest extent that was reasonably practicable;
(b) where the patented invention was a product, that a demand for the product in the United Kingdom

(i) was not being met on reasonable terms, or
(ii) was being met to a substantial extent by importation;

(c) where the patented invention was capable of being commercially worked in the United Kingdom, that it was being prevented or hindered from being so worked:

(i) where the invention was a product, by the importation of the product,
(ii) where the invention was a process, by the importation obtained directly by means of the process or to which the process has been applied;

(d) that by reason of the refusal of the proprietor of the patent to grant a licence or licences on reasonable terms:

(i) a market for the export of any patented product made in the United Kingdom was not being supplied, or
(ii) the working or efficient working in the United Kingdom of any other patented invention which made a substantial contribution to the art was prevented or hindered, or
(iii) the establishment or development of commercial or industrial activities in the United Kingdom was unfairly prejudiced;

(e) that by reason of conditions imposed by the proprietor of the patent on the grant of licences under the patent, or on the disposal or use of the patented product or on the use of the patented process, the manufacture, use or disposal of materials not protected by the patent, or the establishment or development of commercial or industrial activities in the United Kingdom, was unfairly prejudiced.

Those provisions remain substantially unchanged in respect of patents belonging to persons who are not nationals of, or domiciled in, a WTO member country or who have no real and effective industrial or commercial establishment in such a country ("non-WTO proprietors").

New Provisions: WTO Proprietors

Where the proprietor of a patent is a national of, or domiciled in, a WTO member country or has a real and effective industrial or commercial establishment in such a country ("a WTO proprietor") the only grounds on which an application for a compulsory licence may be made are:

"(a) where the patented invention is a product, that a demand in the United Kingdom for that product is not being met on reasonable terms;
(b) that by reason of the refusal of the proprietor of the patent concerned to grant a licence or licences on reasonable terms:

(i) the exploitation in the United Kingdom of any other patented invention which involves an important technical advance of considerable economic significance in relation to the invention for which the patent concerned was granted is prevented or hindered, or
(ii) the establishment or development of commercial or industrial activities in the United Kingdom is unfairly prejudiced;

(c) that by reason of conditions imposed by the proprietor of the patent concerned on the grant of licences under the patent, or on the disposal or use of the patented product or on the use of the patented process, the manufacture, use or disposal of materials not protected by the patent, or the establishment or development of commercial or industrial activities in the United Kingdom, is unfairly prejudiced."

The comptroller may neither order a compulsory licence nor enter on the register that licences under the patent shall be available as of right unless the applicant tries to obtain a licence from the proprietor on reasonable commercial terms and conditions and his efforts prove unsuccessful within a reasonable period (s. 48A (2)). No such order or entry may be made at all if the patented invention is in the field of semiconductor technology (s.48A (3)). An order or entry be not made under (b) (i) above unless the comptroller is satisfied that the proprietor of the patent for the other invention is able and willing to grant the proprietor of the patent concerned and his licensees a licence under the patent for the other invention on reasonable terms (s.48A (4)). Further, such a licence may not be assigned except to a person to whom the patent for the other invention is also assigned (s.48A (5)). Any compulsory licence granted in pursuance of an order or entry made under s.48 above in respect of a patent whose proprietor is a WTO proprietor must:

(a) be non-exclusive;
(b) be non-assignable except to a person to whom there is also assigned that part of an enterprise that enjoys the use of the patented invention, or the part of the goodwill that belongs to that part;
(c) e predominantly for the supply of the market in the United Kingdom;
(d) include conditions entitling the proprietor of the patent concerned to remuneration adequate in the circumstances of the case, taking into account the economic value of the licence; and
(e) be limited in scope and in duration to the purpose for which the licence was granted.

New Provisions: Non WTO Proprietors
The grounds on which an application may be made for a compulsory licence in respect of a patent that does not belong to a WTO proprietor are set out in s. 48B (1). As noted above, they are essentially the same as before save that the United Kingdom may be supplied by imports from other EC member states for the purposes of (c) (i) and (ii). S.48B (3) precludes an order or entry on the register if the invention is worked in an EC member state or demand is met by importation from that country.
Cancellation of an Order or Entry on the Register
Art 31 (g) TRIPs requires WTO members to terminate authorization for compulsory licences or other use of a patent without the patentee's consent should the circumstances that led to such authorization change and be unlikely to recur provided there are adequate safeguards for licensees. The paragraph also requires the competent authority of each state to have authority to review, upon motivated request, the continued existence of those circumstances. Regulation 6 implements this requirement by conferring on WTO proprietors a right to apply to the comptroller to revoke an order for a compulsory licence or cancel an entry on the register on the ground that the circumstances that led to such order or entry no longer apply and are unlikely to recur. Such an application may be opposed by giving notice of opposition. The comptroller may revoke an order, terminate a compulsory licence or cancel on entry on such terms as she thinks necessary for the protection of the legitimate interests of any person affected. An appeal from her decision lies to the court. Consequential changes are made in the Patents Rules to facilitate applications to the comptroller under these provisions.

 

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