Compulsory licensing in Hong Kong

  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?

Declaration by the Director of Health (“Director”) allowing a product that is necessary or expedient in connection with an extreme urgency to be imported/exported, put on the market, stocked, or used. This applies to a product, and/or any other act, which would apart from compulsory licensing, amount to an infringement of the patent concerned.

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

Compulsory licences for standard patents (sections 64-67 of the Cap. 514 Patents Ordinance (“PO”)); Government use of patented inventions (sections 68-72 of the PO); Import compulsory licences for patented pharmaceutical products (sections 72A-72J of the PO); and Export compulsory licences for patented pharmaceutical products (sections 72K-72R of the PO).

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

No limitation on the type(s) of products or technologies to which compulsory licensing is applicable.

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

No.

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

Any person, including foreigners or foreign companies, can apply for a licence under the patent.

Pursuant to the PO, a compulsory licence may be granted under the grounds of (i) non-working or insufficient working of the patented invention; (ii) refusal to grant licences on reasonable terms; (iii) public health; (iv) national emergency and/or extreme urgency; and (v) dependent patents.

Under the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”), no such grounds are specified, instead giving a freedom to determine grounds in domestic patent laws, though widely recognised grounds are specified as a patentee abusing his exclusive right, excessive prices, market demand not sufficiently satisfied, public interest (health, national security issues), dependent patents, and government non-commercial use, etc.

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

Preconditions for standard patents:

  • Application can be filed after the expiration of three years from the date of grant of a standard patent.
  • One of the application grounds listed under section 64(2) of the PO (a)-(e).
  • Applicant has made reasonable efforts to obtain authorisation from the proprietor on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time.

Preconditions for dependent patents:

  • The proprietor of the patent has refused to grant a licence on reasonable terms and as a result, the working or efficient working of any other patented invention is prevented or hindered.
  • The dependent patent must involve an important technical advance of considerable economic significance in relation to the patent that is the subject matter of the compulsory licence (section 64(2)(d) of the PO).

Preconditions for government use of patents:

  • A period of extreme urgency from the perspective of the Chief Executive in Council that it is necessary or expedient in the public interest to grant a compulsory licence (e.g. public health problems resulting from HIV/AIDS, tuberculosis, malaria and other epidemics).
  • Hong Kong has no or insufficient capacity to manufacture a patented pharmaceutical product to meet the needs for the product in Hong Kong.
  • In relation to export compulsory licences, the notification from the importing member to TRIPs Council that it is facing a national emergency or other circumstances of extreme urgency.
  • In case of a lack of such notification, the proposed compulsory licensee must make reasonable efforts to obtain authorisation from the proprietor of the patent concerned prior to submitting his application for an export compulsory licence (section 72L of the PO).

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? 

For the duration of the licence, the patented pharmaceutical product, which is imported to Hong Kong under the licence, shall not be exported out of Hong Kong.

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

The court: for standard patents.

The Chief Executive in Council: for government use of patents during a period of extreme urgency.

The Director: for import/export compulsory licences during a period of extreme urgency declared by Chief Executive in Council.

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

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

Application for export compulsory licences for patented pharmaceutical products shall be:

  • made in writing and specifying the name/amount of the patented product to be made and sold for export, the name of the eligible importing member, the duration of the export compulsory licence, and/or the proposed labelling, marking, packaging, colouring or shaping of the patented product (for more information, please refer to section 72(L)(2)(a) of the PO)
  • accompanied by a copy of the written request from the eligible importing member or non-governmental organisation authorised by the eligible importing member to the applicant for the patented product and the amount of the product requested; and a copy of the notification made by the eligible importing member to the TRIPS Council (for the separate procedure in case of no such notification, please refer to section 72(L)(4) of the PO).
  • No time limit specified for the granting of an application.

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

Yes, in the discretion of the Director during a period of extreme urgency declared by Chief Executive in Council (section 72(B)&(C) of the PO).

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

A compulsory licence can be revoked/terminated if the proprietor of the patent applies to the court for an order to terminate on the ground that any term or condition of the licence imposed has been contravened (and/or any information, document or documentary evidence specified in or accompanying the licence application is false, incorrect or incomplete in any material way for an export compulsory licence) and the court, on an application, makes an order to terminate the licence (section 72J & 72R of the PO) .

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

The Director (and/or court upon application by the patent owner) may terminate a compulsory licence by giving notice in writing to the compulsory licensee if he is satisfied that any term or condition of the licence imposed has been contravened; or any information, document or documentary evidence specified in or accompanying the licence application is false, incorrect or incomplete in any material way (section 72G/72Q of the PO).

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

On the termination of the period of extreme urgency, the importing compulsory licensee shall take reasonable steps to recall or cause the recall of any patented pharmaceutical product imported under the compulsory licence; surrender to the Director any patented pharmaceutical product in his possession or recalled; dispose of the product in such a way as may be agreed with the proprietor of the patent (section 72H of the PO). Stocking of any such patented pharmaceutical products may amount to an infringement of the patent concerned. After the import, the compulsory licensee surrenders the product to the Director or disposes of the product from the effective date of the termination of the period of extreme urgency (section 72H of the PO). A person to whom a patented pharmaceutical product is disposed of in accordance with an import compulsory licence shall not export or cause to export the product out of Hong Kong (section 72I of the PO).

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

Royalty shall be paid to the proprietor of a patent granted in an exporting member for the export of a patented pharmaceutical product to Hong Kong in accordance with the relevant instrument (i.e. an agreement) or legislation, but only to the extent that such a contract could have been fulfilled from existing manufacturing or another capacity of the proprietor or licensee; but is payable notwithstanding the existence of circumstances rendering him ineligible for the award of such a contract. If remuneration has been paid, no remuneration shall be paid to the proprietor of the patent concerned granted in Hong Kong for the import compulsory licence in relation to the product (section 72E of the PO).

Where government use is made of an invention, the government shall pay (i) to the proprietor of the patent; or (ii) if there is an exclusive licence in force to the exclusive licensee, compensation for any loss resulting from his not being awarded a contract to supply the patented product or to perform the patented process or supply a thing made by means of the patented process (in default of agreement, to be determined by the court).

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 Director determines the amount of remuneration for the export compulsory licence in relation to the product (section 72N of the PO). The total amount of remuneration determined by the Director shall not exceed 4% of the total purchase price for the product payable by the import compulsory licensee to the seller of the product in the exporting member; or (ii) if the remuneration cannot be agreed upon, either party may apply to the court for determination of the amount payable. In determining the amount, the court will take into account all factors relevant to the circumstances, including the economic value to Hong Kong of the use of the relevant patented pharmaceutical product; humanitarian or non-commercial factors relevant to the grant of the licence (section 72E&72P of the PO).

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

Normally such other remuneration is to be determined by the court or the Director to the extent it fits.

If the private right holder fails to reach an agreement with the Director on the amount of remuneration or is not satisfied with the decision by  the Director on matters including, but not limited to the grant of compulsory licence, any term or condition of a compulsory licence imposed (including government use of an invention), the right of any person to receive any part of a payment and the apportionment thereof, and/or termination of the compulsory licence, he may apply to the court for a review of or an order to decide on such matters (section 72 of the PO). The government shall provide to the private right holder any legal remedies that the court determines necessary (section 75E(2) of the PO).

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? 

Required if such acts authorised or agreed to be provided in relation to the patented pharmaceutical product under the terms and conditions of the licence; otherwise, required if the Director still thinks this is necessary in regard to the public health needs in Hong Kong in a period of extreme urgency (section 72D of the PO).

15.1 Will this provision of know-how and support be compensated and how is the amount of such compensation determined?

The provision of know-how and support will be compensated if the Director and the private right holder agree to do so and/or if the court determines to do so on an application submitted by the private right holder or any other person who is entitled to claim this – subject to a 4% loyalty restrictions under Q38 (section 72E&72(F) of the PO).

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

The compulsory licensee is obliged to a duty of confidentiality, even in the case of government use of the invention (section 69(11) of the PO & Article 39.3 of the TRIPS Agreement).

16.1 If the compulsory licensee discloses the confidential information in violation of its obligation, does the right holder have a basis of claim against the compulsory licensee? 

In this case, the right holder has a basis of a claim against the compulsory licensee under common law duty of confidentiality.

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

Yes, upon acceptance of application by the Director (section 72L(1) of the PO).

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

The patented pharmaceutical product made under the licence shall be exported only to the eligible importing member specified in the licence; and if the patented pharmaceutical product is also patented in the eligible importing member, the product shall be exported to the eligible importing member after it has granted a compulsory licence for importation of the product.

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?

Yes, any person may apply to the court at any time after the expiration of three years from the date a standard patent has been granted (sections 64-67 of the PO).

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?

The compulsory licence is non-assignable (except for that part of the enterprise or goodwill organisation, which enjoys the use of the patent under the licence) and is also not exclusive (section 72N of the PO), but any provisions/regulations on assignment are of no effect in relation to any government use of an invention so far as those provisions restrict or regulate the working of the invention.

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

Where an application for compulsory licence is made in respect to a patent by a person who holds a licence under the patent, the court may (i) if it orders the grant of a licence to the applicant, order the existing licence to be cancelled; or (ii) instead of ordering the grant of a licence to the applicant, order the existing licence to be amended (section 65 of the PO).

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

The patented pharmaceutical product shall be (i) clearly identified as being imported under the licence through specific labelling or marking; and (ii) distinguished from the same product made by or under authorisation of the proprietor of the patent concerned through special packaging, colouring or shaping (section 72D/72N of the PO).

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

The patented pharmaceutical product, which is imported to Hong Kong under the licence, shall not be exported out of Hong Kong.

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

N/A (to be determined by the Director and/or court if necessary).

Portrait ofJonathan Chu
Jonathan Chu
Partner
Hong Kong (CMS CMNO - Lau, Horton & Wise LLP)