Commission proposal on a Union compulsory license

Following a public consultation in 2022, the Commission has provided a draft regulation for a Union compulsory license (Regulation COM(2023)224). This proposal forms part of the EC pharma and patent package presented on 26 April 2023.

Background and aims of the proposal

The background of the Commission’s proposal for a Union compulsory licence is a conflict between the following circumstances in the status quo:

• Regulation patchwork: Currently, compulsory licensing of patents in the EU is fragmented, as every member state has its own legislation on compulsory licensing.
• Cross-border value chains: Many value and supply chains operate across different member states.

Due to this conflict, it can be difficult and burdensome to obtain compulsory licences covering the entire value chain. Before this background the Commission has presented a draft Regulation for a Union compulsory licence which aims at

• Providing an effective tool in crisis times as a last resort when voluntary agreements do not work
• Ensuring an appropriate territorial reach of compulsory licensing to cover cross-border supply chains
• Complementing the EU crisis mechanisms that have been and are being established
  
  

Details of the draft regulation COM(2023)224

Requirements

The basic requirement for a Union compulsory license is provided in Art. 4 of the draft regulation and lies in the activation or declaration of a crisis mode or emergency mode listed in the Annex to the draft regulation. In addition to this basic requirement, the grant of a Union compulsory license inter alia requires that there is a need for a Union compulsory licence in the context of this crisis or emergency. This might, in particular, be due to a shortage of crisis-relevant products.

Conditions

Art. 5 of the draft regulation governs the general conditions of a Union compulsory licence and inter alia provides:

• The Union compulsory licence shall be non-exclusive and non-assignable (except with that part of the enterprise that enjoys the licence)
• The scope of the licence shall be limited to
  • The purpose for which it has been granted and the scope and duration of the crisis mode or emergency mode on which it is based
  • The territory of the Union
• A Union compulsory licence for a patent also covers and SPC based on this patent, provided that the SPC enters into force while the Compulsory licence is still in force

Procedure

The procedure for grant of a Union compulsory licence is initiated by the Commission. In a first step, it involves the consultation of an advisory body (Art. 6 of the draft regulation). Besides other tasks, the advisory body shall provide an opinion to the Commission with regard to the need for a Union compulsory licence and the conditions for such licence (Art. 7 Sec. 1 of the draft regulation).

According to Art. 7 Sec. 3 of the draft regulation, the grant procedure shall further involve the concerned right holder and the potential licencee who shall, in particular, comment on the possibilities to reach a voluntary agreement which would make a compulsory licence obsolete. Also the public shall be informed, if the grant of a Union compulsory licence is considered (Art. 7 Sec. 5 of the draft regulation).

If the requirements for Union compulsory licence are met, the Commission grants it by means of an implementing act (Art. 7 Sec. 7).

Judical review

In general, implementing acts of the Commission are subject to judicial review by the CJEU but there are no specific provisions in the draft regulation in that regard for the grant of the Union compulsory licence.

Effects

Once granted, the Union compulsory licence, has, inter alia, the following effects:

• Permission for the licensee to exploit the protected invention within the scope of the licence
• Suspension of data exclusivity and market protection, where applicable (cfr. Recital (14) of the draft regulation)
• Remuneration of right holder payable by the licensee (according to Art. 9 of the draft regulation, the remuneration shall not exceed 4% of gross revenue generated through activities under compulsory licence)

Export

Another interesting question is the question of export.

In general, export of products manufactured under Union compulsory licence shall be prohibited (Art. 11 of the draft regulation). However, there is an exception for pharmaceutical products:

Regulation (EC) No. 816/2006 already provides the possibility of national compulsory licences for export of medicines to non-EU countries with health problems. According to the present proposal, this regulation will be amended to the effect that also the Commission may grant a compulsory licence where the activities of manufacture and sale for export spread across different Member States and would therefore require compulsory licences for the same product in more than one Member State (Art. 23 of the draft regulation).

Relationship to national compulsory licence regimes

The proposed Union compulsory licence is not intended to replace national compulsory licence regimes but supplements them in order to be able to effectively tackle future EU-wide crises or emergencies.