As the spread of COVID-19 accelerates across the globe, everyone wants to find a way to tackle the pandemic, from Governments asking manufacturers to urgently make vital equipment to inventors creating innovative solutions. In Italy, for example, inventors have created a 3D printable valve that can turn a snorkelling mask into a portable ventilator and in Israel the Government has approved the import of generic versions of a patented HIV antiviral drug for use in treating COVID-19. Patent systems around the world include a number of unique and rarely used provisions designed to ensure sufficient access to certain inventions in times of crisis, often subject to appropriately balancing the impact on rights holders. In this article we look at the laws that inventors, rights holders, and those wanting to use a patented invention should be aware of in the rush to meet the medical and technological challenges raised by COVID-19.
France
French law provides a number of alternative grounds to acquire a compulsory patent licence. Among these, the following mechanisms would be the most likely to apply to patent rights over COVID-19 related inventions which would be of interest to the French government or to other companies, if the relevant legal requirements were met.
Administrative licence in the interest of public health
In the absence of agreement with the patent holder, the relevant French ministries can subject a patent to the regime of compulsory licence if "the interest of public health requires it". It must be established that the products at stake are made available to the public in insufficient quantities or at an abnormally high price by the patentee. This mechanism applies to patents covering either (i) a drug, medical device, or in vitro diagnosis device, (ii) the process for obtaining such products or (iii) a process of ex vivo diagnosis.
The relevant Ministry makes its decision based on the opinion of a special Commission composed of public executives and health experts, which must be handed down within two months. The patentee can file its observations before this Commission.
As soon as the administrative order implementing a compulsory licence regime is published, any company having the relevant capacities and qualifications can file a licence request with the Minister in charge of industrial property. The non-exclusive licence can then be granted through a specific administrative order which sets outs its terms (notably its scope and duration), to the exclusion of its price. In the absence of amicable agreement on the price of the licence, approved by the relevant Ministries, this price is fixed by a decision of the Paris Court of First Instance.
To the best of our knowledge, these provisions have never been applied in France.
Court-ordered licence for insufficient commercialization
As from four years after the filing of a patent or three years after its grant, any public or private person having the relevant qualifications can file a petition before the Paris Court of First Instance to obtain a compulsory non-exclusive licence on this patent. It must be established that during this period the patentee has not started to commercialize the patented product or is not commercializing it in sufficient quantities to satisfy the needs of the French market. There must be no "legitimate cause" for the lack of exploitation of the patent, and the applicant must show that it has failed to obtain a fair and reasonable licence from the patentee on an amicable basis.
If the licence is granted, the Court's decision fixes its duration, scope and royalty rate.
Court-ordered licence for dependent inventions
It may be possible to obtain a compulsory license to a patent on the ground that such license is required for the exploitation of a junior patent, insofar as the latter embodies an important progress of "considerable" economic significance in relation to the invention claimed in the senior patent. The holder of the junior patent may request such licence before the Paris Court of First Instance. It is also worth noting that the senior patent holder then has a right to ask for a cross-license over the junior patent. To the best of our knowledge, these provisions have never been applied in France.
Authored by Stanislas Roux-Vaillard and Adrien Bonnet
Germany
The German Patent Act (GPA) provides for two mechanisms to restrict patent rights, 'restriction orders' and compulsory licenses. Both mechanisms are very seldom used and both share high substantive requirements. In either mechanism the patent proprietor receives a consideration (either in the form of compensation ("Entschädigung") or in the form of a license payment determined by a court).
Restriction orders
Restriction orders pursuant to Section 13 GPA are seldom discussed and have apparently never been used since 1945. This is not surprising since they are designed for very specific scenarios only. With regard to the current pandemic it allows for the State to restrict the prohibiting effect of a patent by way of administrative order. The invention can subsequently be used by the State or designated companies. The substantive requirements are high. It must be used to protect 'public welfare' which could be affected in cases of natural disasters or epidemics.
A recent legislative change of 28 March 2020 shows the relevance the German State sees in the possible application of Section 13 GPA. A new Section 5 German Infection Protection Act has been introduced which makes it possible for the Federal Ministry of Health to also make use of Section 13 GPA directly provided:
- the German Bundestag finds that there is an "epidemic scenario with national scope" – this finding has already been made with regard to COVID-19; and
- the order covers specific products that are used for the public welfare namely drugs and their components, medical devices, laboratory diagnostics, auxiliary supplies as well as personal protective equipment and products for disinfection.
The Federal Ministry of Health can also designate subordinate administrative bodies to make use of Section 13 GPA.
Restriction orders can be used within days and are in the hand of the State. Should a need for a specific product or drug arise, the German government might not be inclined to wait for a private company to sue for a compulsory license for which that company would have to have an incentive in the first place.
Compulsory licenses
Compulsory licenses pursuant to Section 24 GPA can be applied for by any third party e.g. a competitor and are granted by the Federal Patent Court if certain requirements are met. A compulsory license requires a public interest in the availability of a product (that would otherwise fall into the scope of a patent). In the medical field, a public interest shall be considered to be served by a product intended for the treatment of serious illnesses where it has therapeutic features which are not, or not to the same extent, available on the market among all other alternative therapeutic products, or which, in its use, avoids the undesired effects which must be taken into account when the other therapeutic products are administered. A compulsory license may also be granted in cases of insufficient supply of the domestic market even if the patent holder exercises the invention completely or predominantly on the domestic market.
Section 24 GPA requires further that the licence seeker has, within a reasonable period of time, unsuccessfully attempted to obtain permission from the proprietor of the patent to use the invention on reasonable commercial terms and conditions. This attempt must be carried out for a 'reasonable period of time'. With regard to the urgency in getting a treatment for COVID-19 and having enough e.g. drugs or tests to adequately supply the patented product on the German market the period of time for trying to receive a license on reasonable commercial terms might be shorter than in other cases.
There is the possibility for a preliminary compulsory license to be granted pursuant to Section 85 GPA.
Authored by Miriam Gundt, Kerstin Jonen and Martin Adrian Koch
Italy
Italian COVID-19 emergency regulation
The Italian Intellectual Property Code (IPC) does not feature general provisions allowing the Government a "Crown use" or the expropriation of IP rights such as patents or designs.
However, the Law Decree No. 18/2020 issued by the Italian Government to comprehensively address the COVID-19 outbreak includes a specific provision (Article 6) to allow the requisition of medical products and, more in general, moveable goods of any kind from public and private entities by decree of the Head of the Civil Protection Department (a governmental body). The requisition is allowed to the extent that these goods are needed to face the current emergency, especially to ensure supply to hospitals and healthcare facilities in Italy and to increase the number of hospital beds.
The scope of Article 6 of the Law Decree is potentially very broad. For instance, it allows the Government to requisition health-related goods that may incorporate patented features, such as drugs, medical devices and personal protective equipment. Moreover, it is arguable that patents and IP rights in general fall into the definition of "movable goods of any kind" that may be provisionally requisitioned, provided they are necessary for the manufacture and sale of related medicinal products and devices related to COVID-19, or other necessary equipment.
The proprietor has the right to receive a compensation for the use of the requisitioned goods at market values on 31 December 2019, without taking into account any variation in price or demand due to the emergency.
Compulsory licensing
The provisions of Article 6 of Law Decree 18/2020 are dictated by the unprecedented public health emergency caused by the COVID-19 outbreak and are subject to a Governmental order. Alternatively, public and private parties can ask the Italian Patent and Trademark Office (IPTO) to grant compulsory patent licenses, at reasonable terms, provided certain grounds are met.
First of all, according to Art. 69 IPC, the patent owner has a duty to implement the invention in Italy (e.g. by manufacturing a product) to such an extent as not to be materially disproportionate to the needs of the country. The duty to implement the invention is met also if the patent owner imports the product covered by the patent, but only if manufacturing takes place in EU, EEA or WTO member states.
Art. 70 IPC thus provides that anyone may ask for a non-exclusive compulsory license on a patent if the invention is not sufficiently implemented in Italy for a certain amount of time (three years after grant or four years after the filing of the patent application, whichever comes last). The same goes if the implementation is suspended for more than three years. However, the compulsory license shall not be granted if the implementation is objectively impaired (e.g. if additional time is required to set up the industrial manufacturing of the product). Lack of financial means or default of the patent owner are not considered objective reasons.
During a medical emergency such as the COVID-19 outbreak, if the patent owner cannot guarantee the supply of a patented product, such as a medical device or drug, to meet the demand of health-facilities, it could be argued that the patent is not sufficiently implemented in relation to the needs of the country, thus leading the way for the grant of a compulsory license. At present, we are not aware of pending cases on this matter.
In addition, Art. 71 IPC provides for a second kind of compulsory license, which may be asked by the owner of a so-called 'dependent' patent, i.e. a patent that cannot be used without infringing a previous patent. In this case, the owner of the later 'dependent' patent can apply for a compulsory license on the previous patent with the IPTO at reasonable terms, but only to the extent that the 'dependent' patent represents an important technical progress of considerable economic importance. Otherwise, the grant of a compulsory license is not allowed. To balance this provision, Art. 71(2) IPC provides that the owner of the previous patent has the right to obtain a cross-licence on the 'dependent' patent.
This provision could be applied also in a situation of medical emergency or pandemic. For instance, if the 'dependent' patent protects a more effective or cheaper pharmaceutical product, which cannot be manufactured or sold in Italy due to the previous patent.
In both cases, whoever requests a compulsory license must prove to the IPTO that he has made attempts to obtain a license from the patent owner on reasonable terms. The party requesting a compulsory license shall not have infringed the patent (unless it can demonstrate its good faith). The license is then granted or refused by the Ministry of Economic Development.
Because the conditions for the grant of a compulsory license are rather strict, these provisions have been used only rarely in Italy, especially in the last thirty years. The attempted negotiation with the patent holder and the administrative proceedings before the IPTO may also take considerable time and defy the need for urgency in a case such as the current COVID-19 outbreak.
State of necessity
Finally, general provisions in the Italian Civil Code (ICC) may be of use to ensure sufficient access to certain inventions in times of emergency.
Art. 2045 ICC introduces a general rule in tort law for "state of necessity". In cases where the violation of rights is compelled by the necessity of saving one's self or others from a present danger of serious personal injury, and the danger was neither voluntarily caused, nor otherwise avoidable, the person that committed the violation shall not be condemned to pay full compensation of damages, but only to pay an equitable amount established by the Court. Since the rules of the ICC generally apply also to IP rights, it is imaginable that Courts could weigh the exceptional circumstances of the current COVID-19 outbreak in determining such equitable amount in case of a patent infringement determined by a "state of necessity".
It must be stressed, however, that the state of necessity referred to by Art. 2045 ICC refers to the specific conditions of the person that is compelled to violate a right. Hence it is unlikely that this provision would be applied generally to the case of a national emergency, if the person is not directly prompted to save himself or others from a present danger. But, it may be argued that hospitals or doctors may rely on Art. 2045 ICC if they are accused of violating IP rights when taking life-or-death decisions with patients in need of care during a pandemic.
Authored by Giovanni Ghirardi, Riccardo Fruscalzo and Giovanni Trabucco
Japan
Under Japanese law, a party who wishes to implement a patented technology may be granted a non-exclusive licence in the case of special necessity based on the welfare of the public. However, to the best of our knowledge, the relevant provisions that authorize this procedure have never been utilized.
Under Article 93 of the Patent Act, a person or legal entity who wishes to implement a patented invention may request the patentee (or registered exclusive licensee, where applicable) to enter into negotiations for a non-exclusive licence if the use of the patented invention is particularly required for the welfare of the public. If such negotiations are unsuccessful, the requesting party may apply for a decision of the Minister of Economy, Trade and Industry. If the Minister considers that the requested use of the patented invention is particularly required from the perspective of the welfare of the public, the Minister would be able to grant a non-exclusive licence to the requesting party.
Although certain commentators consider this Article to be the Japanese counterpart of a compulsory licence clause, the scope of this article (e.g., to what extent is a special necessity based on the welfare of the public required, and the particulars of how this mechanism works) is unclear, as it appears this provision has never been used before. However, it is possible that this Article could be invoked if, for example, an unmanageable spike of COVID-19 cases occurs in Japan and a shortage of medical resources (e.g., pharmaceuticals, medical devices, masks) becomes a reality.
Of course, if a patentee desired to use its patents to help in the fight against COVID-19, but still wished to protect its intellectual property rights, it may do so under Japanese law. A patentee has wide discretion to determine the conditions of a licence that the patentee grants to any person or legal entity. As one example, a patentee might grant a royalty-free licence of its patent only to individuals or legal entities that wish to implement the patented invention(s) on a non-profit basis, as was done in the case of the Italian snorkel mask inventor discussed above.
Authored by Frederick Ch'en, Mitsuhiro Yoshimura and Kyle Reykalin
Spain
The Spanish Patents Act provides for two alternatives, expropriation of patent rights and compulsory licensing, allowing the Government and/or others to exploit third parties' patented inventions under certain circumstances, particularly for reasons of public or social interest, as long as fair compensation is given to the patent owners.
You may want to explore such mechanisms in case you hold patent rights over COVID-19 related inventions that you foresee may be of interest to the Spanish Government or other companies or if you have relevant or exceeding manufacturing capabilities and believe that you could benefit from a compulsory license in order to exploit a third party's invention to help fight COVID-19.
Expropriation of patent rights
The Government is allowed to expropriate patent rights (patents or patent applications) for reasons of public utility or social interest, granting fair compensation to the right-owner. The expropriation may be directed at (a) having the invention fall into the public domain –so that it can be freely exploited by anyone, without the need to apply for licenses- or (b) the State obtaining ownership of the patent rights in order for the invention to be exploited exclusively by it.
The expropriation shall be ordered by law, which will declare the public utility or social interest concerned, as well as whether the invention is to fall into the public domain or whether the State is to acquire ownership of the patent rights. The expropriation procedure and requirements, including the issues related to the fixing of a fair price to be paid to the right-owner, will be governed by the Spanish laws on forced expropriation. The right-owner will be entitled to launch proceedings in case there is no agreement regarding the compensation set up by the Public Administration.
Compulsory licensing
The Government can also make a patent available for compulsory licensing at any time, by Royal Decree issued by the relevant Ministry(ies), if it considers this to be in the public interest. Public interest will be met in cases where (a) the exploitation of the invention –or the improvement of the conditions in which such exploitation is carried out- are of primary importance for public health or for national defense; (b) the lack –or insufficient- exploitation causes serious damage to the economic or technological development of the country, or (c) the national supply needs so require.
In case of national emergency or extremely urgent circumstances, the Government may directly establish the scope, conditions and applicable license fee. Otherwise, it will be for the Spanish Patents and Trademarks Office to do so following a specific procedure where both parties will be heard and a mediator could also intervene.
Moreover, anyone who is interested in exploiting a third party's patented invention is entitled to file a request for a compulsory license with the Spanish Patents and Trademarks Office, which will grant it only under certain circumstances. The latter include cases where, according to the law, the patentee has not exploited the patent within the relevant time periods or the exploitation is not sufficient to meet the national demand. This scenario could prove to be relevant in emergency situations like the one caused by COVID-19, where most countries are facing supply problems regarding relevant medical equipment.
The applicant for the compulsory license must provide evidence that it has the capacity needed to exploit the invention and show that it has tried to obtain a license on commercially reasonable terms from the patentee with no success. The latter requirement, which is not always easy to meet, will not apply in case of national emergency or extremely urgent circumstances like the one at hand.
Authored by Ana Castedo and Inmaculada Lorenzo
The Netherlands
The Netherlands provides for the possibility of a compulsory license for the public interest, which may be relevant in the current COVID-19 pandemic. A compulsory license still requires the licensee to pay a reasonable license fee. The Crown Use provision in the Netherlands is limited to national defense situations.
Compulsory Licensing
The Minister of Economic Affairs can grant a compulsory license to one or more specific third parties if he believes the public interest requires this. Public interest is interpreted broadly, so it may well cover a pandemic. On the other hand, the requirement that the public interest must 'require' a compulsory license implies that there is a high threshold for this provision to be applicable.
If the Minister considers granting a compulsory license, then he will first investigate whether the patentee is willing to grant the license voluntarily under reasonable conditions. The Minister can only skip this procedure if urgency requires this. If no agreement for the license conditions can be reached with the patentee, then the District Court of The Hague can set the license fee. The Minister can make the compulsory license subject to a security to be provided by the licensee. A decision by the Minister to grant a compulsory license can be appealed. This appeal has suspensive effect unless the Minister decides otherwise.
The compulsory license is not exclusive. The Minister can withdraw the compulsory license, taking into account the reasonable protection of the reasonable interests of the licensee, when the circumstances that have led to the grant of the compulsory license no longer exist and it is unlikely that they will come into existence again.
Although attempts have been made in the past, a compulsory license for the public interest has so far never been granted in the Netherlands. Last year, the Minister set up a compulsory licensing committee which will investigate the possible use of compulsory licenses in view of the desire to control the costs of medicines. The recent spike of COVID-19 cases in the Netherlands has also led to an increased interest in the possibility of compulsory licensing.
Crown Use
There is also a Crown Use provision in the Netherlands, which allows the State to conduct acts that would otherwise be prohibited by a patent, or to allow others to conduct such acts. The acts will need to be specifically described in the decree to be issued by the State. The Crown Use provision is however limited to the situation that these acts are required for the defense of the country.
When the State decides to make use of the Crown Use provision and the decree has entered into force, then the Minister will discuss a reasonable license fee with the patentee. If no agreement is reached within six months, then the District Court of The Hague can set the license fee.
As the Netherlands has not declared a state of emergency, it seems less likely that the State would turn to the Crown Use provision. Nevertheless, as we are living in unprecedented times and governments of other countries are turning to national defense legislation, this possibility cannot be completely ruled out either.
Authored by Ruud van der Velden
UK
There are two key mechanisms in the UK that allow Governments and others the ability to use third party inventions without infringing patents: the 'Crown Use' exception and the compulsory licensing regime.
Crown Use
The 'Crown Use' exception to patent infringement allows the Government (or a Government authorised person) to carry out acts that would otherwise infringe a patent, such as the production or supply of specified drugs and medicines, without having first identified or negotiated with any relevant patent owners. The list of permitted acts is non-exhaustive, and past cases have included the use of drugs to treat NHS patients, and more recently a mobile network operator granting priority network access to emergency responders to enable them to help the public. If the Government declares a state of emergency, the purposes for which the Government can invoke these provisions is even wider, including for the maintenance of supplies and services essential to the life and well-being of the community. This gives the Government a powerful tool to urgently deploy (or authorise others to deploy) patent-protected products and identify right-holders and negotiate licensing terms later. If you are working to develop a COVID-19 related medicine, process, or equipment, you may want to consider whether the Crown use exception applies. If so, you should seek the appropriate authorisation from the Government now to remove concerns about potentially infringing third party patents. Similarly, if you are a rights-holder you may want to consider tracking potentially infringing products that are being made by third parties, to establish whether a Crown use authorisation is in place, and so that any appropriate claims for compensation can be made in due course.
Compulsory Licensing
If you know that a particular medicine or device is patented, it is also possible to apply to the UK Patent Comptroller for a 'compulsory' licence to the relevant patent(s) (i.e. a licence granted without the patent owner's consent). This regime aims to ensure that a patented invention can be worked in the UK at a commercial scale, without undue delay, and to the fullest extent reasonably practicable – where this is in the public interest. Certain grounds must be met, such as showing that demand for that product is not being met on reasonable terms. In addition, the applicant must first have made unsuccessful efforts for a reasonable period of time to obtain a licence from the patent owner on reasonable terms. However, it appears possible for this requirement to be waived in cases of national emergency or public non-commercial use, and in any case, the Comptroller's view on a reasonable period of time for such efforts may depend on the wider circumstances. Any licence granted will be limited in scope and duration, and will entitle the patent holder to appropriate remuneration. Rights holders should consider the potential for a compulsory licence to be sought if negotiations break down, including being prepared to make representations to the Comptroller if appropriate.
Authored by Katie McConnell and James Gray
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