What is a compulsory license, and in which countries does it exist?

Many people, while filing an application for an invention, a utility model or an industrial design to the Federal Institute of Industrial Property, have no idea what they will do next with a patent obtained and the exclusive right to the indicated results of the intellectual activity that is owned by them, in particular, to the use of these inventions, utility models and industrial designs.

The issue on further commercialization, namely, the creation of the manufacture, the further sale of the manufactured products at the market has not even been considered by the patent holder.

And here, the patent holder is faced with the situation that unless he uses his patented solution, he may be deprived of the exclusive rights in a compulsory manner.

Let us find out what the exclusive rights of the patent holder to the results of the intellectual activity are. In fact, the exclusive right is considered as a “monopoly” granted by the state to the patent holder for the use of the invention, the utility model and the industrial design.  However, this “monopoly” is not of an absolute nature and it is limited both by the norms of the patent law and by the limits of exercising the civil rights stipulated by the current civil legislation. Thus, the exclusive right is the absolute right. The absolute rights include such subjective civil rights, within the frameworks of which the holder of these rights is opposed by an indefinite circle of the persons, who undertake to refrain from the actions that violate his rights.

The main international act that enshrines the general requirements for the exceptions from the scope of the patent holder’s exclusive rights to the subject matters of the intellectual activity is the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) adopted by the World Trade Organization. According to Article 30 of the TRIPS Agreement, the members may stipulate the limited exceptions from the exclusive rights granted by the patent, provided that such exceptions do not conflict unreasonably with the normal use of the patent and do not infringe unreasonably on the legitimate interests of patent holder, taking into account the third parties legitimate interests. The current Russian patent legislation, based on the principles stipulated within the framework of the TRIPS Agreement, contains a number of the rules that limit the legal monopoly of the patent holder to the result of the intellectual activity.  One of these limitations is a compulsory license.

The compulsory license is a permission issued by the public authorities to an interested person to the use of the patented invention, utility model or industrial design. If the patent holder does not use or uses insufficiently his development, as well as if he refuses to sell the license, the compulsory license is a limitation of his exclusive right with regard to the free disposal of this right. Such permission is explained as a measure to “prevent the abuses that may arise as a result of the author’s activity or the lack of it.” 

The compulsory licenses can be simple (non-exclusive).  This kind of the license shall cover the territory within the borders of the Russian Federation. The state registration of the compulsory license shall be carried out according to a court decision.  The author shall come into his rights from the moment of the state registration.  The compulsory license is usually issued to the authors, who have violated the patent.

According to Article 1239 of the Civil Code of the Russian Federation, the compulsory license shall be issued by the court decision and under the conditions established by the court. The effect of the compulsory simple (non-exclusive) license may be stopped by the court according to the patent holder’s statement of claim, in the absence of the circumstance that has led to the grant of the compulsory license.

The compulsory license shall be issued after the expiration of 4 years from the date of filing the patent application or 3 years from the date of the issuance of the patent.  Such provision is applied in all member countries of the Paris Convention that ratified the Lisbon and Stockholm versions of the Convention.

The issuance of the compulsory license shall be carried out at the request of an interested person after the consideration by Rospatent. The request for the grant of the compulsory license may also be filed independently by the person, who has the license to the patent.  The compulsory license is similar to the simple license in terms of the content and scope of the rights.

In the case of granting the compulsory simple (non-exclusive) license, the author of the patent for the invention or the utility model, the right to the use of which is granted under the compulsory license, shall be entitled to obtain the simple (non-exclusive) license to the use of the dependent invention, due to which the compulsory simple (non-exclusive) license has been granted.

The disputes regarding the issuance of the license and the payment of damages, as well as regarding the amount of the damages, shall be resolved through the legal proceedings.

Having reviewed the provisions of Article 1362 of the Civil Code of the Russian Federation, it is possible to conclude that there are a number of the criteria that are necessary for the possibility of obtaining the compulsory license for the invention, the industrial design or the utility model: 

- the subject matter of the patent defense should not be used by the patent holder or used insufficiently; 

- the use or the insufficient use must occur within a certain time period: for the invention or the industrial design it is four years from the date of the issuance of the patent; for the utility model it is three years;

- the actions of the patent holder should lead to the shortage of the relevant products, works or services at the market; 

- the patent holder refuses from concluding the license agreement. 

Thus, it is necessary to have an entire set of these conditions for the potential patent user could file a statement of claim to the court on the grant of the compulsory license to him for the subject matter of the patent defense.

It should be noted that the compulsory license for selection achievements has distinctive peculiarities.  It follows from Article 1423 of the Civil Code of the Russian Federation, which such peculiarities shall include: 

- the absence of the requirement on the non-use by the patent holder of the subject matter of the patent protection, only the expiration of the three-year period from the date of obtaining the patent is necessary;

- the absence of the requirement on the shortage of the relevant products, works or services at the market.

In this case, the compulsory license cannot be considered as a liability measure for the civil law violation. The absence of the requirement on the mandatory use of the subject matter of the patent defense and on its insufficiency leads to a conclusion that the set of the elements of the civil law violation has not been formed, and therefore, it is needless to say about the liability measures.

The differences of such kind in an approach to the issues for obtaining the compulsory license for the invention, the industrial design, the utility model and obtaining the compulsory license for selection achievements can be justified by the fact that, from the point of view of the Russian legislation regarding the selection achievements, it is necessary to simplify the process of overcoming the patent holder’s “monopoly,” as they are the subject matters that stipulate the satisfaction of the most important public interests. 

The essence of the patent law is based on the idea that the patent holder has the legal monopoly for the subject matter of the patent rights. However, the problem arises that this legal monopoly may be a basis for the abuse by the patent holder of his rights. In this regard, Article 1362 of the Civil Code of the Russian Federation stipulates all the elements of the civil law violation as the basis for granting the compulsory license, so the compulsory license is nothing more than the liability for the patent holder’s failure to fulfill his duty.