Compulsory licensing in England and Wales

  1.  What is the definition of compulsory licensing?
  2. What are the applicable sources of law relating to compulsory licensing?
  3. What type(s) of products or technologies do compulsory licensing applies to? 
  4. Who can apply for a compulsory licence? Are foreigners or foreign companies allowed to apply for a compulsory licence? 
  5. What are the legal grounds to grant a compulsory licence under the local laws of your jurisdiction and any applicable international treaties?
  6. Are there any preconditions to apply for a compulsory licence?
  7. Are there any limits on the number of compulsory licensees?
  8. Will there be any limitation on the scope of the compulsory licence, for example limitations on the time and the territory? 
  9. Which authority has the competency to grant a compulsory licence?
  10. What are the application procedures to get a compulsory licence?
  11. Can the competent authority grant a compulsory licence without hearings under an urgent situation?
  12. Can a compulsory licence be revoked/terminated or automatically revoked/terminated? 
  13. Does the compulsory licensee have to pay a royalty to the right holder? 
  14. Are there any legal remedies for the party who is not satisfied with the compulsory licensing decision of the competent authority?
  15. In order to implement the compulsory licence, for example, to manufacture the licenced product, is the right holder required to provide necessary support, such as know-how and training as in a voluntary agreed licence agreement? 
  16. Is the compulsory licensee subject to any confidentiality obligation? 
  17. Is the compulsory licensee allowed to export their products under the compulsory licence? 
  18. Have the laws on compulsory licensing been used in previous health emergencies and/or in the present COVID-19 pandemic in your jurisdiction?
  19. Is it possible for third parties to use the current laws on compulsory licensing in your jurisdiction to facilitate the treatment of patients infected by COVID-19?
  20. Are there any recent major regulatory exemptions and/or amendments made following COVID-19 to regulations governing compulsory licensing?
  21. Can a compulsory licence be transferred or assigned?
  22. Does the issuance of a compulsory licence have any impact on the previously agreed licence?
  23. Is there any special labelling requirement for the products made under the compulsory licence?
  24. Is there any special distribution channel requirement for the products made under the compulsory licence?
  25. Is there any price requirement for the products made under the compulsory licence?

1. What is the definition of compulsory licensing?

There is no specific definition of compulsory licensing. However, section 48 of The Patents Act 1977 provides that “at any time after the expiration of three years, or of such other period as may be prescribed, from the date of the grant of a patent, any person may apply to the comptroller on one or more of the relevant grounds: (a) for a licence under the patent; (b) for an entry to be made in the register to the effect that licences under the patent are to be available as of right; or (c) where the applicant is a government department, for the grant to any person specified in the application of a licence under the patent”.

2. What are the applicable sources of law relating to compulsory licensing?

The Patents Act 1977 (sections 46 – 54).

3. What type(s) of products or technologies do compulsory licensing applies to? 

Any product that is not in the field of “semi-conductor technology” (Section 48A(3) of The Patents Act 1977).

3.1 Has any compulsory licence ever been issued in your jurisdiction? If yes, on what type of technology? 

Yes, the most recent compulsory licence issued was in Swansea Imports Limited and Carver Technology Limited on 10 June 2004. The technology concerned was different aspects of heater units. Details can be found in the following article.

4. Who can apply for a compulsory licence? Are foreigners or foreign companies allowed to apply for a compulsory licence? 

Any person may apply to the IPO for a compulsory licence (section 48(1) of The Patents Act 1977).

In the case of an application made in respect to a patent with a WTO proprietor, a licence may be granted under the grounds of (i) where the patented invention is a product, that a demand in the UK for that product is not being met on reasonable terms; (ii) refusal to grant licences on reasonable terms that lead to the exploitation in the UK of any other patented invention, which involves an important technical advance of considerable economic significance or unfairly prejudices the establishment or development of commercial or industrial activities in the UK; (iii) 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 UK is unfairly prejudiced.

(Section 48A of The Patents Act 1977)

In any other case, a compulsory licence may be granted under the grounds of:

  1. where the patented invention is capable of being commercially worked in the UK, that it is not being so worked or is not being so worked to the fullest extent that is reasonably practicable;
  2. where the patented invention is a product, that a demand for the product in the UK (a) is not being met on reasonable terms, or (b) is being met to a substantial extent by importation from a country, which is not a member state;
  3. where the patented invention is capable of being commercially worked in the UK, that it is being prevented or hindered from being so worked (a) where the invention is a product, by the importation of the product from a country, which is not a member state, and (b) where the invention is a process, by the importation from such a country of a product obtained directly by means of the process or to which the process has been applied;
  4. that by reason of the refusal of the proprietor of the patent to grant a licence or licences on reasonable terms: (a) a market for the export of any patented product made in the UK is not being supplied; (b) the working or efficient working in the UK of any other patented invention, which makes a substantial contribution to the art is prevented or hindered; or (c) the establishment or development of commercial or industrial activities in the UK is unfairly prejudiced;
  5. 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 UK is unfairly prejudiced.
    Furthermore, where: (a) an application is made on the grounds that the patented invention is not being commercially worked in the UK or is not being so worked to the fullest extent that is reasonably practicable; and (b) it appears to the comptroller that the time, which has elapsed since the publication in the journal of a notice of the grant of the patent has for any reason been insufficient to enable the invention to be so worked, he may by order adjourn the application for such a period as will – in his opinion – give sufficient time for the invention to be so worked.

(Section 48B The Patents Act 1977)

[Note: the term “member state” in this part of the legislation means EEA states. It is unclear whether this part of the legislation will be amended after the Brexit transition period ends on 1 January 2021 and the UK will no longer be part of the EU or EEA.]

6. Are there any preconditions to apply for a compulsory licence?

6.1 Any negotiation required between the applicant and the right holder before applying for a compulsory licence? 

In respect to an application made relating to a patent with a WTO Proprietor: Yes. No order shall be made unless the applicant has made efforts to obtain a licence from the proprietor on reasonable commercial terms and conditions and his efforts have not been successful within a reasonable period (Section 48A(2) The Patents Act 1977).

In any other case: No negotiation required. However, no licence shall be granted unless the comptroller is satisfied that the proprietor of the patent for the other invention is willing and able to grant the proprietor of the patent concerned and his licensees a licence.

6.2 Any urgent situation required in order to grant a compulsory licence?

No.

6.3 Any minimum number of years required for the patent to be granted and/or implemented in order to be subject to compulsory licensing?

The applicant must wait until the expiration of three years from when the patent was granted before being able to apply for a compulsory licence. (Section 48(1) The Patents Act 1977)

7. Are there any limits on the number of compulsory licensees?

Not specified.

8. Will there be any limitation on the scope of the compulsory licence, for example limitations on the time and the territory? 

The licence shall be limited in scope and in duration to the purpose for which the licence was granted. The licence shall also be predominantly for the supply of the market in the UK. (Section 48A(6) The Patents Act 1877)

9. Which authority has the competency to grant a compulsory licence?

Intellectual Property Office (IPO)

10. What are the application procedures to get a compulsory licence?

An application can be made to the IPO after three years from the date when the notice of the grant of a patent appears in the journal. The application will be advertised in the journal and a copy of the application and statement of grounds will be sent to the proprietor of the patent in order to give an opportunity for opposition

10.1 What materials need to be submitted to the competent authority?

Any application should be made by filing Patents Form 2 accompanied by a copy thereof and a statement of grounds (in duplicate). It is not necessary to file evidence verifying the statement. The statement should set out the grounds on which the application is made, which should be one or more of those specified in s.48A(1) (if the proprietor is a WTO proprietor) or s.48B(1) otherwise. (Guidance note 48.08 The Patents Act 1977)

10.2 How long will it take to get a compulsory licence?

Not specified.

11. Can the competent authority grant a compulsory licence without hearings under an urgent situation?

Under section 55 of The Patents Act 1977, any government department or person authorised in writing by a government department may, for the services of the Crown, perform certain acts in the UK without the consent of the proprietor of the patent. Such acts consist of: (i) making, using, importing/keeping the product or selling or offering to sell the product where doing so would be ancillary to making, using importing or keeping it; or (ii) selling or offering to sell the product for foreign defence purposes or for the production or supply of specified drugs and medicines.

Section 59 of The Patents Act 1977 provides for Crown use during a period of emergency and extends the powers provided under Section 55 to include the power to use the invention for any purpose necessary: (a)

  1. for the efficient prosecution of war;
  2. for the maintenance of supplies and services essential to the life of the community;
  3. for securing a sufficiency of supplies essential to the well-being of the community;
  4. for promoting the productivity of industry, commerce and agriculture;
  5. for fostering and directing exports and reducing imports, or imports of any classes, from all or any countries and for redressing the balance of trade;
  6. generally for ensuring that the whole resources of the community are available for use, and are used, in a manner best calculated to serve the interests of the community; or
  7. for assisting the relief of suffering and the restoration and distribution of essential supplies and services in any country or territory outside the UK, which is in grave distress as the result of war;

and any reference in this Act to the services of the Crown shall, as respects any period of emergency, include a reference to those purposes.

A “period of emergency” is defined as “any period beginning with such date as may be declared by Order in Council to be the commencement, and ending with such date as may be so declared to be the termination, of a period of emergency for the purposes of this section”.

The abovementioned provisions could lead to government authorisation of certain medical equipment or the manufacture of certain medicines and the Crown use defence could then act as a defence to potential patent infringement claims.

12. Can a compulsory licence be revoked/terminated or automatically revoked/terminated? 

Yes, it can be revoked or terminated under section 52(3) of The Patents Act 1977 upon appeal to the Patents Court.

12.1 What are the conditions for the revocation/termination of a compulsory licence? 

A WTO proprietor can apply to the comptroller to have the order revoked or terminated on the grounds that the circumstances, which led to the making of the order or entry have ceased to exist and are unlikely to recur.

12.2 How should products made under a compulsory licence be treated if the compulsory licence is terminated/revoked?

Not specified, but when the comptroller decides to terminate a licence granted to a person he will do so subject to such terms and conditions as he thinks necessary for the protection of the legitimate interests of that person (Section 52(3(b) of The Patents Act 1977)

13. Does the compulsory licensee have to pay a royalty to the right holder? 

Under Section 48A(6)(d) of The Patents Act 1977, a licence granted to a person in respect to a patent with a WTO proprietor shall 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. Under Section 50(1)(b) of The Patents Act 1977, the inventor or person beneficially entitled to a patent shall receive reasonable remuneration having regard to the nature of the invention.

13.1 If the compulsory licensee is required to pay a royalty, how is the amount of royalty determined and who will decide the amount of the royalty?

Guidance note 48.18 of The Patents Act 1977 sets out that the royalty should be negotiated between a willing licensor and willing licensee. Even though section 50(1)(b) requires the patentee to receive “reasonable remuneration”, the royalty should not be such that the applicants could not bear it and were thus put out of the market.

13.2 Is there any remuneration available for the right holders other than royalty?

Not specified.

Under Section 52(6) of The Patents Act 1977, where the proceedings are referred to an arbitrator or arbiter (under section 52(5)(b)), an appeal of the award shall go to the court.

15. In order to implement the compulsory licence, for example, to manufacture the licenced product, is the right holder required to provide necessary support, such as know-how and training as in a voluntary agreed licence agreement? 

Not specified.

16. Is the compulsory licensee subject to any confidentiality obligation? 

Not specified.

17. Is the compulsory licensee allowed to export their products under the compulsory licence? 

This is not expressly provided for, but Section 48A(6)(c) states that the licence shall be predominantly for the supply of the UK market.

18. Have the laws on compulsory licensing been used in previous health emergencies and/or in the present COVID-19 pandemic in your jurisdiction?

N/A

19. Is it possible for third parties to use the current laws on compulsory licensing in your jurisdiction to facilitate the treatment of patients infected by COVID-19?

It is possible. However, the pre-conditions that have to be met (noted in point 6 above), such as requiring the patent to be granted at least three years prior to the application for a compulsory licence, may limit the effectiveness of the current regime in the present environment. The applicant must also have sought a licence from the patentee (on reasonable terms), which was refused. This means that it is perhaps more likely that the “Crown use” defence available under Section 55 of The Patents Act 1977 will be relied upon in these circumstances.

20. Are there any recent major regulatory exemptions and/or amendments made following COVID-19 to regulations governing compulsory licensing?

N/A

21. Can a compulsory licence be transferred or assigned?

Under Section 48A(6)(b) of The Patents Act 1977 a compulsory licence granted to someone in respect to a patent with a WTO proprietor shall not be assigned except to a person to whom there is also assigned the part of the enterprise that enjoys the use of the patented invention, or the part of the goodwill that belongs to that part.

22. Does the issuance of a compulsory licence have any impact on the previously agreed licence?

Not specified.

23. Is there any special labelling requirement for the products made under the compulsory licence?

Not specified.

24. Is there any special distribution channel requirement for the products made under the compulsory licence?

Not specified.

25. Is there any price requirement for the products made under the compulsory licence?

Not specified.

Sarah Innes
Sarah Innes
Partner
London