The European Commission’s New Compulsory Licensing Proposal: A Step Forward?
By Sarah Gabriele
On April 27, 2023, the European Commission proposed new legislation that would allow companies to make drugs without the patent holder’s consent in emergency situations. The proposed legislation constitutes a step forward in the European Union’s effort to harmonize patent law in the Union, after the establishment of Unitary Patents and the European Patent Court.
In its proposal, the EU Commission acknowledges that intellectual property rights, and, in particular, patent rights play an important role in access to medicine, especially during public health crises. The COVID-19 crisis demonstrated how the need for protecting and incentivizing innovation clashed with the need to make products widely available. To solve this tension, the Commission recognizes that patent law already offers a solution: compulsory licensing.
The Proposal
A compulsory license allows third parties to use a patent without asking prior permission from the owner of said patent. When there is a compulsory license in place, a government of a country allows a third party to manufacture and distribute a product protected by patents, without the consent of the patent owner. Compulsory licenses are one of the flexibilities explicitly recognized by the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS Agreement).
This new proposal establishes a Union compulsory licensing scheme with respect to patents (including patent applications), utility models, and supplementary protection certificates in force in one or more member states of the European Union (Article 2).
The powers to grant such a license will be in the hands of the Commission. The Commission may grant a Union compulsory license where a crisis or an emergency mode has been declared (Article 4).
The license shall be (i) non-exclusive and non-assignable; (ii) have a scope and duration that is limited to the scope and duration of the crisis; (iii) be strictly limited to the relevant activities of crisis-relevant product in the Union; (iv) only be granted against payment of adequate remuneration; (v) be limited to the territory of the Union and (vi) only be granted to a person deemed to be in a position to exploit the protected invention in a manner that permits the proper carrying out of the relevant activities (Article 5).
Towards the Harmonization of European Patent Law
This legislation constitutes a step forward for harmonizing patent law in European countries, together with the establishment of the Unified Patent Court and the Unitary Patent. While individual member states already have compulsory licensing schemes implemented in their national legislations, there is no harmonization among European countries.
The fragmentation across countries results in a fragmentation of policies adopted in member states for crisis-related products. With the implementation of the proposed Regulation, companies will be able to benefit from the compulsory license scheme across Europe, ensuring the smooth functioning of the single market in crisis situations.
This effort and the proposed legislation do not come as a surprise. The European Commission had already underlined in 2020 the need to ensure that effective compulsory licensing systems are in place.
A Missed Chance for Fostering Accessibility Worldwide
Article 1 of the proposed legislation specifies that the objective of the regulation is to ensure that, in crises, the countries of the European Union have access to crisis-relevant products. While this effort is noteworthy and it further highlights the importance of compulsory licenses, the European Union should acknowledge the importance of said effort also outside the Union. Indeed, one of the most problematic aspects for developing countries trying to adopt flexibilities such as compulsory licenses is the constant opposition by the governments of developed countries, which are usually more sensitive to the interests of pharmaceutical companies. Indeed, the governments of developed countries, often pressured by the lobbying of the pharmaceutical industries, have retaliated or threatened to retaliate against countries seeking to adopt flexibilities. For example, the U.S. and the EU have adopted measures to apply political pressure to discourage the use of these mechanisms.
In addition, Article 11 of the proposed Regulation prohibits the export of products manufactured under a Union compulsory license. While this limitation might not impact accessibility and utilization of compulsory licenses in Europe, it prevents other countries that might lack the necessary manufacturing capacity from importing cheaper versions of products. The European Commission should consider the possibility to allow exportation to countries that would not otherwise be able to produce or manufacture their own crisis-related product.
The European Union’s effort to establish a Union compulsory license is a positive step toward harmonizing patent law and creating a more effective single market across the Union. However, it is also a missed chance to take into consideration interests of other countries that might be struggling with securing access to medicine. Such an effort should be undertaken by the European Union and other countries in spirit of cooperation as well as in acknowledgement of the fact that health care is not a zero sum game.
