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PROPOSED CHANGES TO PATENT COMPULSORY LICENSING REGIME
When the Patent Act was amended in 2004, new provisions based on Article 31 of the WTO TRIPS Agreement were introduced into to define legal grounds for the grant of a compulsory licensing of patent, procedural requirements for compulsory licensing applications, and conditions for the cancellation or revocation of a compulsory licensing grant.
A third party may apply to the Intellectual Property Office (IPO) for the grant of a compulsory patent licensing under any of the following conditions: in a situation of national emergency, in a situation to promote the public interest, where the party applying for compulsory licensing has been tried but unable to obtain a licensing grant through reasonable negotiation, in the situation to seek remedy against unfair competition acts, and in cases of reinventions etc.
In two high-profile cases—that of the CD-R optical media patents owned by Philips, and that of a patent for manufacturing Tamiflu® drug to treat bird fly deceases, as owned by Gilead Sciences and exclusively licensed to Hoffmann–La Roche—the IPO granted compulsory licensing to GigaStorage Corp. and to the ROC Department of Health under Article 76 Paragraph 1 of the Patent Act on the grounds, respectively, that "the applicant remained unable to obtain a licensing grant based on reasonable commercial terms after a considerable period of time," and "in response to a situation of national emergency."
Both decisions attracted widespread and intense attention both domestically and internationally. Neither case is the subject of further legal disputes because in the first, the applicant withdrew its compulsory licensing application, and in the second, the patentee did not pursue administrative remedies. However, in view of the controversies raised by these two cases, the IPO deemed it necessary to amend the compulsory licensing provisions of the Patent Act achieve greater clarity. On 8 July 2008, the IPO convened a meeting attended by representatives from industries, government agencies concerned and academia, to discuss related issues. The main discussion points and recommendations of the meeting are outlined below:
- Should the Chinese term of "compulsory license" be changed?
In order to make the terminology used in the legislations consistent and appropriate, it is recommended that the current term "texu shishi" ("practice under special permit") should be changed to "qiangzhi shouquan" ("compulsory licensing").
- Is it appropriate for "failure to obtain licensing grant based on reasonable commercial terms proposed for a considerable period of time" to be retained as a ground for compulsory patent licensing?
It is recommended that "failure to obtain licensing grant based on reasonable commercial terms proposed for a considerable period of time" be made a procedural criterion for seeking compulsory licensing, subject to the substantive criteria of "no-profit-making use for public interest" factor and "reinvention" factor.
- Under the current Act, where a patentee has committed acts restraining competition or acts of unfair competition as "irrevocably confirmed" by a local court or the Fair Trade Commission, it is allowed to seek compulsory licensing. Is the "irrevocably confirmed" condition as stated above appropriate?
The meeting recommended that the references in the current Act as to "irrevocably confirmed" and "unfair competition" should be deleted, and, based on UK legislation, new test of "unfairly hindering national industrial and commercial development" be introduced. Under the current system, powers to grant compulsory licensing rest with the IPO, which should remain unchanged; provided, that the IPO should only issue an affirmative decision after a FTC decision clearly states its opinion that there is a need for compulsory licensing.
- Should there be separate procedures for compulsory licensing based on "government use" and that based on other grounds?
The meeting proposed that the time period for a patentee to file a defense against an application for compulsory licensing should be specified by the IPO. Where a compulsory licensing is sought in response to a national emergency or other emergency situation, the IPO may grant a compulsory licensing on the basis of an emergency decree, or based on a notification issued by the government agency needing to use the patent concerned.
- Should the "compensation for compulsory licensing" be set simultaneously when issuing a grant of a compulsory licensing?
Currently, after the compulsory licensing is granted, the amount of compensation payable to the patentee should be decided by the IPO if there is no agreement reached. The meeting recommended that Article 76 Paragraph 5 of the Act be amended to require the amount of compensation be decided at the same time as a grant of compulsory licensing.
- Is it necessary to for the IPO to revoke a compulsory licensing ex officio or upon a request, and is there a need for having a monitoring mechanism after the grant of a compulsory licensing?
The meeting recommended that specific provisions be introduced into the Act authorizing the IPO to revoke the grant of compulsory licensing at a request by the patentee where (1) changes arise with respect to the fact warranting the grant of compulsory licensing, (2) the licensee of the compulsory licensing does not properly practice the licensed patent in accordance with the content of the licensing, or (3) the licensee of the compulsory licensing does not pay the compensation as needed. If a compulsory licensing is granted on the basis of a notification from a government agency requiring the use of a patent, and if the agency concerned believes that due to a subsequent change of the circumstances, the emergency situation no longer exists, or the compulsory licensing grant is revocated or annulled through administrative remedies, the agency concerned should notify the IPO to revoke or annul the compulsory licensing.
- Should the current Patent Act provisions related to reinventions be amended?
The meeting recommended that if the holder of an earlier-filed patent does not agree to grant an authorization, the holder of the later-filed invention patent or new utility model patent or the holder of the process patent may apply for compulsory licensing in accordance with the provisions of Article 76 Paragraphs 3 to 6 of the Act; provided, that such compulsory licensing should be available only if the content of the later-filed invention, new utility model, or process patent involves important technical improvement with considerable economic significance as compared with the earlier-filed invention patent or new utility model patent. In addition, the holder of the earlier-filed patent, as well as the holder of the later-filed patent invention patent or new utility model patent or the holder of the later-filed process patent may agree to reach a cross-licensing arrangement. Further, the right to practice a patent under compulsory licensing may not be assigned, entrusted, inherited, licensed, or pledged, except where such right is assigned, entrusted, inherited, licensed, or pledged together with the later-filed invention patent, utility model patent, or process patent.
The IPO will refer to these recommendations when drafting its proposed amendments to the Act. We will continue to follow the progress of the amendments and keep readers updated.