Compulsory licensing in Germany

Section 24 (1) German Patent Act (Patentgesetz – "GPA") contains a definition of compulsory license. It reads as follows:

"The non-exclusive authorisation to commercially use an invention shall be granted by the Federal Patent Court in an individual case in accordance with the following provisions (compulsory licence)… 

Accordingly, the compulsory license is a non-exclusive right of use granted by the Federal Patent Court (Bundespatentgericht) if further pre-conditions are met.

The basic common source is Section 24 GPA which specifies the compulsory licenses with respect to granted patents. This provision applies on German patents and the German national part of European patents. Further statutory provisions regarding compulsory licenses under various registered intellectual property rights:

• Section 16a (2) GPA refers to the application of Section 24 GPA also with respect to supplementary protection certificates.
• Section 20 German Utility Model Act (Gebrauchsmustergesetz) refers to the application of certain provisions of the GPA regarding compulsory licenses.
• Further provisions regarding compulsory licenses are contained in Sections 12 and 12a German Plant Varieties Protection Act (Sortenschutzgesetz) and Section 42a German Copyright Act (Urheberrechtsgesetz).

Section 13 GPA provides: "The patent shall have no effect in a case where the Federal Government orders that the invention is to be used in the interest of public welfare. Further, it shall not extend to a use of the invention which is ordered in the interest of the security of the Federal Republic of Germany by the competent highest federal authority or by a subordinate authority acting on its instructions." This provision has been put into the focus at the beginning of the COVID-19 pandemic, instead of the "normal" compulsory license provision in Section 24 GPA, but so far no order has been made yet pursuant to Section 13 GPA.

In principle, compulsory licenses are possible for all patented inventions if the preconditions for granting are met. However, in fact applications for compulsory licenses under Section 24 GPA have been made only in relation to pharmaceutical patents with respect to specific medicinal products so far. Furthermore, the special compulsory license provisions in in Sections 12 and 12a German Plant Varieties Protection Act (Sortenschutzgesetz) relate to plant varieties and biotechnological inventions.

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

There were three cases in which a pharmaceutical company applied for a compulsory license for its medicinal product under Section 24 (1) GPA:

• In the first case relating to the marketing of the pharmaceutical product Polyferon (IFN-gamma as active pharmaceutical ingredient) the Federal Patent Court (Bundespatentgericht) granted a compulsory license that, however, was cancelled by the Federal Court of Justice (Bundesgerichtshof) in the appeal.
• The second case relates to the HIV drug Isentress (Raltegravir as active pharmaceutical ingredient). After request for a compulsory license by way of interim decision the Federal Patent Court (Bundespatentgericht) ordered the compulsory license and the Federal Court of Justice (Bundesgerichtshof) maintained the decision. The patent at issue was cancelled later, but nonetheless the royalty had be paid for the compulsory license for the period from the order until cancellation of the patent.
• Just recently the request for a compulsory license for the cholesterol lowering drug Praluent (Alirocumab as active pharmaceutical ingredient) was refused by the Federal Patent Court (Bundespatentgericht) and the Federal Court of Justice (Bundesgerichtshof). Again, the applicant requested an interim decision for a compulsory license, but made a first license offer to the patentee only three weeks before filing the law suit for the compulsory license although patent infringement proceedings were pending already for around two years.

Applications for compulsory licenses may be made by everyone. Foreigners or foreign companies are generally not excluded.

The main provision for compulsory patent licenses in Section 24 GPA foresees the license grant in five different scenarios:

1. Section 24 (1) GPA: If a licence seeker has, within a reasonable period of time, unsuccessfully attempted to obtain permission from the patent owner to use the invention on reasonable commercial terms and conditions, and the public interest calls for the grant of a compulsory licence. These requirements set out in Section 24 (1) GPA are included by reference in the cases described in the following paragraphs.
2. Section 24 (2) GPA: If a patented invention cannot be commercialized without infringing an invention patented with a higher seniority (earlier patent), the owner of the later patent is entitled to a compulsory license to the older patent if the invention protected by the later patent represents significant technical progress of considerable economic importance compared to the invention protected by the earlier patent. In case of granting a license, the owner of the earlier patent is also entitled to a compulsory license to the later patent.
3. Section 24 (3) GPA: If a plant breeder cannot obtain or commercialize a plant varieties protection right without infringing an invention patented with a higher priority (earlier patent), he shall be entitled to a compulsory license to the patent, provided that the plant variety represents significant technical progress of considerable economic interest compared with the invention protected by the patent and provided that this compulsory license is necessary for commercialization of the plant variety to be protected.
4. Section 24 (4) GPA: If the holder of a patent for a biotechnological invention is granted a compulsory license for a plant variety protected by a plant varieties protection right granted with a higher priority (earlier plant variety right) because he cannot commercialize the biotechnological invention without infringing an earlier plant varieties protection right, the holder of the earlier plant varieties protection right shall be entitled to a compulsory license to the later patent for the exploitation of the protected invention.
5. Section 24 (5) GPA: If a patented invention is not adequately exercised in Germany, whereby the exercise may also be effected by import, and if the patent owner has not taken all steps necessary for such exercise, any person shall be entitled to a compulsory licence to the patent for his business, unless the patent owner proves that the exercise of the invention in Germany is not reasonable or not reasonable to a greater extent than has been the case because of the difficulties involved in the exercise.

Yes, the basic conditions are set forth in Section 24 (1) GPA.

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

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. The Federal Court of Justice (Bundesgerichtshof) has emphasized in its decision regarding the cholesterol lowering drug Praluent that this requirement must be applied strictly and, particularly, the mere tactical (first) license request in light of pending patent infringement proceedings close before the scheduled oral hearing is not sufficient.

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

No. However, it is possible to request an interim decision ordering a compulsory license in urgent situations. Such requests will be handled in expedited proceedings according to Section 85 (1) GPA.

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?

No. The patent must be granted and in force. There will not be ordered compulsory licenses under patent applications.

No. However, it is clear that the license seeker may be granted only one compulsory license under the same patent. Moreover, any granted compulsory license under a specific patent will – at least implicitly – be considered in the context to the pre-conditions of the subsequent compulsory license request of another license seeker, particularly with respect to the pre-conditions of whether "the grant of the compulsory license is required in the public interest" (Section 24 (1) No. 2 GPA) or whether the "patentee does not uses the patented invention in Germany" and "grant of the compulsory license is necessary to ensure sufficient supply of the patented product in the German market" (Section 24 (5) GPA).

In general, the compulsory license ordered by decision of the Federal Patent Court (Bundespatentgericht) does not have a retrospective effect since it is directed to a use of the patented technology in the future. The scope of the compulsory license depends on the request of the license seeker and, furthermore, will be limited to the extent necessary for the license seeker's purpose justified by the public interest. The compulsory license is limited to patent protected activities to be conducted in Germany.

The compulsory patent license according to Section 24 GPA will be granted by decision of the Federal Patent Court (Bundespatentgericht) in the first instance and the Federal Court of Justice (Bundesgerichtshof) in the second (appellate) instance.

Use orders under Section 13 GPA (Benutzungsanordnung) are made by the German Federal Government (Bundesregierung); the competency has been delegated to the Ministry of Health under Section 5 (2) No. 5 German Infection Protection Act (infektionsschutzgesetz) for certain products specified in the act at the beginning of the COVID-19 pandemic (and the ministry is entitled to further delegate its competency to subordinated administrative authorities).

Compulsory licenses with respect to Plant Varieties Protection Rights according to Sections 12 and 12a German Plant Varieties Protection Act (Sortenschutzgesetz) are ordered by the Federal Plant Variety Office (Bundessortenamt).

Actions for compulsory licenses according to Section 42a German Copyright Act (Urheberrechtsgesetz) must be filed before the ordinary courts competent at the author's seat; or if the author does not have a seat in Germany, before the ordinary court in Munich.

At first, the license seeker must attempt to reach an agreement with the patent owner. If this is not possible, the license seeker may file a law suit at the Federal Patent Court (Bundespatentgericht) for ordering the compulsory license for specific product(s). The Federal Patent Court will decide on the grant of the license on the merits and determines an appropriate remuneration.

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

There are no specific formal requirements. The general requirements for nullity proceedings apply, i.e. the application must include a summary of the main facts, a sufficiently substantiated request (i.e. why the legal requirements for ordering a compulsory license are met) as well as an account of the evidence to support the request.

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

Likely several months up to one to two years in main proceedings (in first instance). However, there is the possibility to file an additional request for an interim order of the compulsory license handled in preliminary proceedings in urgent matters; Section 85 GPA. The Federal Patent Court (Bundespatentgericht) decides about such request for an interim order usually in two to three months and the Federal Court of Justice (Bundespatentgericht) the appeal usually within eight to ten months after first instance decision.

No. The Federal Patent Court (Bundespatentgericht) decides on the basis of an oral hearing according to Section 85 (3) GPA.

A compulsory license may be ordered by the Federal Patent Court (Bundespatentgericht) with limitation in time and will automatically terminate if the ordered maximum period of time expires.

The patentee or its legal successor is entitled to request revocation of the compulsory license if the circumstances upon which the order of the compulsory license was based no longer apply and if their recurrence is improbable; Section 24 (6) sent. 6 GPA. The patentee may file a respective law suit for revocation at the Federal Patent Court (Bundespatentgericht); Section 81 GPA.

The patentee and the compulsory licensee may further terminate the compulsory license by agreement.

The compulsory license is automatically terminated if the relevant patent is cancelled, expires or becomes invalid.

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

The circumstances upon which the order of a compulsory licence was based no longer apply and their recurrence is improbable; Section 24 (6) sent. 6 GPA.

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

The products already sold are covered by the compulsory license. If the manufacturing is covered by the compulsory license and the royalty obligation became due and payable already with the manufacturing of the product, the licensee must still pay such royalty.

Yes, the compulsory licensee must pay the royalty determined by the Federal Patent Court (Bundespatentgericht) to the patentee.

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?

The royalty obligation is determined by the Federal Patent Court (Bundespatentgericht) which decides also on the structure of the royalty (e.g. one-time lump sum; running royalty per piece or per turnover). When determining the royalty, the court will consider particularly the economic power of the compulsory licensee and the reasonableness of the compensation for the patentee. Typically, a turnover-based royalty at a rate between 1-10% is to be expected.

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

No. However, the patentee might have a damages claim for the compulsory licensee's patent infringing use before the order of the compulsory license.

Either party may file an appeal against the first instance decision of the Federal Patent Court (Bundespatentgericht) which will be finally and legally decided by the Federal Court of Justice (Bundesgerichtshof). Moreover, the patentee is entitled to file a law suit for revocation of the compulsory license according to Section 81 GPA at any time if the requirements of Section 24 (6) sent. 6 GPA are met.

No.

No, not in general. The accounting and royalty reports provided by the compulsory licensee might be covered by a statutory duty of confidentiality, particularly according to the German Trade Secrets Protection Act (Geschäftsgeheimnisgesetz).

The compulsory license does not cover the export of any product manufactured and/or distributed in Germany to another country where a parallel patent covering the relevant product is granted. Particularly, the rights of the patentee under a parallel national part of a European Patent are not exhausted through the putting the relevant product on the German market under the compulsory license.

17.1 If the compulsory licensee is permitted to export products under the compulsory license, are there any requirements and limitations on the export of such products?

The compulsory licensee is free to export the products manufactured and/or distributed under the compulsory licensee to countries where the products are not covered by a parallel patent of the patentee.

No. Although the competence for use orders under Section 13 GPA (Benutzungsandordnung) has been delegated to the Ministry of Health for specific products under Section 5 (2) No. 5 German Infection Protection Act (Infektionsschutzgesetz).

Yes. In principle, this is possible, but it is open whether a third party would file a request for a compulsory license under Section 24 GPA. The current (political) discussion in Germany is rather focused on ministerial use orders under Section 13 GPA (Benutzungsandordnung) in light of the slow start of the supply with vaccines against COVID-19.

No major regulatory exemptions have been made. Only the competency for use orders under Section 13 GPA (Benutzungsanordnung) have been delegated from the German Federal Government (Bundesregierung) to the Ministry of Health under Section 5 (2) No. 5 German Infection Protection Act (infektionsschutzgesetz) for certain products specified in the act at the beginning of the COVID-19 pandemic (and the ministry is entitled to further delegate its competency to subordinated administrative authorities).

According to Section 24 (7) GPA the compulsory patent license may be transferred only together with business, where the compulsory license is used, i.e. where the patented invention is used.

In case of a compulsory patent license according to Section 24 (2) GPA (license under an older patent necessary to enable use of a dependent patented invention), such license can be assigned only together with the (dependent) patent with earlier priority date.

No, unless there is a specific provision in the previously concluded license agreement with respect to subsequent grant of a compulsory license.

The statutory provisions in Section 24 GPA do not provide explicitly for such labelling requirement. However, the Federal Patent Court (Bundespatentgericht) might order such labelling in its decision if this is deemed necessary in the interest of the patentee.

This is not explicitly provided in the statutory provisions in Section 24 GPA, but limitations for distribution may be ordered by the Federal Patent Court (Bundespatentgericht) in its decision under which the compulsory license is granted if this is deemed necessary in the interest of the patentee.

This is not explicitly provided in the statutory provisions in Section 24 GPA, but minimum sales prices may be ordered by the Federal Patent Court (Bundespatentgericht) in its decision under which the compulsory license is granted if this is deemed necessary in the interest of the patentee, or price ceiling with respect to the grounds on which the compulsory license is granted (i.e. public interest requires such pricing regime in order to ensure availability of the patented products on German market at affordable prices).