Update on compulsory licensing in the context of COVID-19 – public consultation of the EU commission

At the beginning of the COVID-19 pandemic in 2020, we have provided comprehensive insights (a pan-European analysis and an analysis focused on Germany) regarding the potential restrictions for patent owners in the context of COVID-19 vaccines and treatments.

The German Patent Act provides two such restrictions, namely

• the Governmental Order of Use according to Sec. 13 German Patent Act which was supplemented by Sec. 5 para. 2 no. 5 Infection Protection Act
• the Compulsory License according to Sec. 24 German Patent Act
  
  

It is obvious that such legal tools can play an important role in crisis situations like the COVID-19 pandemic. However, as far as evident from public information, there haven’t yet been any legal proceedings in Germany wherein such restrictions have been asserted against patent owners in the context of COVID-19 vaccines or treatments. Also the initial approach of the European Commission set out in the EU strategy for COVID-19 vaccines dated 17 June 2020 did not consider the use of compulsory licenses or similar tools.

Nonetheless, the COVID-19 pandemic has triggered a discussion on these issues on the European level, as apparent from the Commission’s 2020 Action Plan on Intellectual Property:

Finally, the Commission sees the need to ensure that effective systems for issuing compulsory licenses are in place, to be used as a means of last resort and a safety net, when all other efforts to make IP available have failed. The WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) provides for a possibility, under the conditions listed, to issue compulsory licences, i.e. government’s authority to grant permission to a party seeking use of a patented invention without the consent of the patent owner. The procedure can be fast-tracked in the case of national emergency. In combination with the Doha Declaration on the TRIPS Agreement and Public Health, it is clear that each WTO Member has not only the right to grant compulsory licences, but also the freedom to determine the grounds upon which such licences are granted.

In Europe, compulsory licensing is mainly governed by national law. The Commission calls on Member States to ensure that the tools they have are as effective as possible, for instance, by putting in place fast-track procedures for issuing compulsory licenses in emergency situations. In addition, it sees a need for a stronger co-ordination in this area, to avoid distortive effects on innovation and trade. Early co-ordination and information sharing between Member States, e.g. on the duration of and royalties on any such licenses, should help secure maximum benefits whilst at the same time avoiding excessive distortions. The Commission will explore with Member States the possibility of creating an emergency co-ordination mechanism, to be triggered at short notice when Member States consider issuing a compulsory license.

Subsequently, the EU Commission has launched an initiative that aims to revise the framework for compulsory licensing so it is adequately prepared & coordinated to tackle future crises. In the respective call for evidence, the problem the initiative aims to tackle is described as follows:

The TRIPS Agreement, in particular Articles 31, 31bis and the Annex, allows WTO members to authorise the use of patented subject matter without the consent of the patent holders if certain conditions are met. Under Article 31, an authorisation to use the patented subject matter for domestic purposes may in principle cover patents in all sectors. An authorisation for export purposes (under Article 31bis and the Annex) is limited to the pharmaceutical sector.

Most WTO members have made this authorisation possible in their national systems through a compulsory licence framework. Currently, legislation on compulsory licensing of patents is fragmented in the EU. EU countries regulate their own compulsory licensing schemes even though many value chains operate across the EU. This can be a source of legal uncertainty, for both right holders and users of IP rights, as the conditions and procedures of such licences (e.g. duration, scope or licence fee setting) can vary from one country to another. In an EU-wide crisis, this can be particularly problematic. A fragmented compulsory licensing framework might not be efficient enough to tackle a crisis (e.g. cross-border production and distribution of complex products such as vaccines).

Furthermore, without EU coordination, EU countries may take different approaches, e.g. some countries could grant compulsory licences for a given product/technology while others may not. This could also affect tackling an EU crisis. No coordination and harmonisation also mean that, even if a crisis only affects one EU country, a unilateral national compulsory licence may not be sufficient if critical products are sourced from other EU countries.

To strengthen the EU’s ability to respond to cross-border health threats, the EU set up HERA. This initiative aims to improve the EU’s response to health crises. It brings together the relevant players in a joint effort to ensure the manufacture, procurement, purchase, stockpiling and equitable distribution of essential medicine and medical supplies. However, an uncoordinated and unilateral use of national compulsory licences could harm EU action to tackle future health emergencies. For instance, if there is a breakdown in voluntary cooperation, the current patchwork of national compulsory licensing systems could affect the possibility to use the production capacity of EU FAB to supply the entire EU. Any outputs produced by an EU FAB factory under a national compulsory licence could only be used predominantly for domestic supply of the EU country in which the factory is located.

If another global or EU-wide crisis strikes (of a health, environmental, nuclear or industrial nature), the EU would need to rely on the most effective and relevant technologies to overcome it. Unfortunately, the fragmentation and the lack of optimal and coordinated EU compulsory licence rules could slow down rolling out effective solutions to supply critical products.

On the export side, the procedure for granting compulsory licences of patents relating to the manufacture of pharmaceutical products for export purposes to countries with public health problems is set out in Regulation (EC) No 816/2006. This Regulation should be assessed to ensure that it provides the most effective procedure in line with Article 31bis of the TRIPS agreement.

On that basis, the EU Commission has identified the following general specific objectives:

The general objective is to create a compulsory licensing system in the EU that would be less fragmented and better-suited for EU-wide crises. Since compulsory licensing may have a significant impact on IP holders, this should remain an exceptional, last-resort measure, applicable in case of failure of voluntary agreements. Working within the bounds of the TRIPs Agreement, the initiative should not lead to higher aggregate burdens or risks for patent holders relative to national regimes, but rather a more convergent, predictable and workable regime in the exceptional cases where recourse to compulsory licensing at EU scale is necessary.

Specific policy objectives:

1. Enhance the efficiency of compulsory licensing in the EU in a crisis.

2. Reduce the fragmentation and improve the coordination of compulsory licensing mechanisms in the EU, including to ensure that they are fit-for-purpose in EU-wide crises and fully consistent with and complementary to other EU initiatives (for instance in the health sector, this would include the EU COVID-19 vaccine strategy, EU COVID-19 therapeutics strategy, HERA, including EU FAB and the pharmaceutical strategy for Europe).

3. Ensure an effective compulsory licensing procedure for exports (Regulation (EC) No 816/2006) in line with Article 31bis of the TRIPS Agreement.

In order to achieve these policy objectives, the EU Commission is considering the following options:

a) No policy change (baseline scenario).

b) Non-legislative measures (e.g. guidelines and recommendations for granting compulsory licences in times of crisis at national level, improving coordination of how national compulsory licences are issued).

c) Legislative changes:

- Creating an EU coordination mechanism for compulsory licensing in times of crisis with or without harmonising national compulsory licensing laws. This option might apply to all types of crises, including health crises.
- Establishing an “EU-level compulsory licence” for use in a crisis, to be applied in some or all Member States, depending on the circumstances. This option might apply to all crises, including health crises; it could exist in parallel to national regimes for purely national purposes.
- Streamlining compulsory licensing for export purposes. As this concerns Regulation (EC) No 816/2006, this would be limited to pharmaceutical products.

The Commission could also plan a combination of non-legislative and legislative measures.

In order to collect the views on the initiative from all relevant stakeholders, the EU Commission has launched a public consultation which started on 7 July 2022 and is still running, until 29 September 2022. Following the public consultation, the EU Commission will publish a summary report on the feedback received.

Regarding the further procedure, the EU Commission intends to finalize the impact assessment by Q4 2022 and adopt in Q1 2023. We will, of course, provide an update as soon as there is news from the EU Commission.