While the grant of a patent gives the patent owner certain exclusive rights in the patented invention, there are instances where those rights may be overridden. One such instance is under compulsory licensing rules. Many jurisdictions have some form of rules covering compulsory licensing for patents, although they are seldom used and enforced.  Herein, we will cover several select jurisdictions and how they address compulsory licensing in their statutory language.

            While the United States does not currently have explicit rules governing compulsory licensing of patents, there are two statutes allowing for “March-in Rights.”  First, under 28 U.S.C. § 1498(a), the U.S. government may grant licenses to patented inventions if: (1) development of the patented invention was done using federal funds and (2) the patent owner has not taken steps to exercise their rights. These steps can include achieving practical application of the invention, reasonably satisfying the health and safety needs of the country, reasonably meeting the requirements for public use specified by federal regulations, or granting an exclusive right (i.e., a license) to use the patented invention, which includes a requirement that the patent’s use be substantially within the U.S. (or where the licensee breaches this requirement). Attempts have been made to petition for these rights; however, no such attempts have been successful.

Second, pursuant to 35 U.S.C. § 203, the U.S. government may exercise March-In Rights for any invention conceived or first reduced to practice under a federal funding agreement. These rights may only be invoked under special circumstances and require reasonableness. One example of such rights is for products developed with funds allocated under the Coronavirus Preparedness and Response Supplemental Appropriations Act. As outlined in this Act, U.S. Congress allocated approximately $3 billion for the development of countermeasures and vaccines to combat the COVID-19 pandemic. To date, such rights have not been exercised by any government agency.

The rules for compulsory licensing of patents in the select jurisdictions of Europe, Mexico, Japan, Australia, and New Zealand contain many of the same requirements with unique statutory aspects in each. Generally, the relevant laws allow for the grant of a compulsory license to any third party upon a showing of non-working of the patented invention and no valid reason for such non-working, or in the public interest. Petitions for compulsory licenses may not be submitted until three years from the grant of a patent, and, in most cases, four years from the application filing date must also have passed. Any compulsory license that is granted will be a non-exclusive license.

Unique to Japan, a third-party petitioner seeking a compulsory license must, at the very least, attempt to conduct preliminary negotiations for a compulsory license directly with the patent owner or exclusive licensee prior to petitioning to the government. Under Mexico law, a petitioner must show it possesses the technical and economic means to practice the patented invention sought to be licensed. Australia law also provides for the grant of a compulsory license if the patentee is practicing restrictive trade practices, such as price fixing, restricting production or supply chains, bid rigging, or otherwise restricting competition. In New Zealand, compulsory licenses will not be granted for any issued patents relating to integrated circuits. In the jurisdictions surveyed, there is very little to no guidance as to the application of the relevant rules and statutory language.

            Related to compulsory licensing of patents is the concept of commercial working. Currently, Turkey and India require patent owners to submit information relating to the exercise of their patent rights within the country. Under Turkish law, patented inventions must be used (i.e., “worked”) within three years from publication of the granted patent in the official Patent Bulletin. Effective use of a patent can be shown by production of a product or use of a method in Turkey by the patentee or a party authorized by the patentee, or by importation of products covered by the patent into Turkey. To satisfy this requirement, the patentee is required to submit a Certificate of Use setting forth information showing effective use or valid reasons for non-use within a non-extendable period of three years from grant of the patent. Documents from the importation of patented products may be submitted in place of the Certificate of Use. If the proper documentation is not submitted or the proper assertions cannot be made, the patentee must request publication of an offer for licensing of the patented invention. Similar to the jurisdictions outlined above, once the three-year time period has expired, and if the proper documentation relating to commercial working has not been filed, a third party may petition for a compulsory license of the patented invention.

            Commercial working requirements in India require patentees to inform the India Patent Office of a patented invention’s use on a commercial scale in India on a yearly basis from grant until the patent rights end. This requirement is satisfied by submitting Form 27 on which the patentee must indicate the use or valid reasons for non-use of a patented invention during the previous year. Recently, the definition of “year” was amended from the traditional calendar year (i.e., January 1 to December 31) to a financial year (i.e., April 1 to March 31). Form 27 must be submitted by September 30 each year for the previous financial year. Use of a patent may be shown by manufacturing in India, known as direct use, or importing patented products into India, known as indirect use. Providing only information that the patented invention has been licensed is not enough to satisfy the working requirement; this must be accompanied by information relating to use or valid non-use. The bar for showing valid reasons for non-use of a patented invention in India is relatively low. Inability to find a licensee, seeking investment, and insufficient demand for the product have all been determined to be sufficient reasons for non-use. A patentee indicating that the patented invention has been worked in India must also provide approximate revenue or value accrued from the manufacture or import of product into India.

            While not often petitioned for, patent owners should be cognizant that compulsory licensing rules exist in several jurisdictions and can come into play if patented inventions are not worked or there is a valid reason for non-working. Consideration should also be given when filing in India and Turkey, as both of those jurisdictions require the submission of commercial working information in the post-grant phase of the patent lifecycle.

            If you have questions about compulsory licensing rules or any other topics touched on in this article, please contact the author, Julie Zamler, at julie@burrisiplaw.com.