The COVID-19 pandemic showed that authorities need effective measures to quickly apply the necessary tools to manage times of crisis, particularly during public health emergencies, regardless of whether the measures are related to supplies of drugs or devices, or implementation of procedures. Governments were faced with difficult policy decisions, one of which being whether IP rights should stand in the way of the actions needed for the good of the public.
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.
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.:
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.
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.
According to the proposal, the CL must specify:
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.
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…