What is compulsory licensing?
Compulsory licensing is when a government allows someone else to produce
the patented product or process without the consent of the patent owner.
It is one of the flexibilities on patent protection included in the
WTO’s agreement on intellectual property — the TRIPS (Trade-Related
Aspects of Intellectual Property Rights) Agreement.
Are these flexibilities new?
No. They always existed in the TRIPS Agreement, ever since it took
effect in January 1995.
But what about the November 2001 Doha Ministerial Declaration on TRIPS
and Public Health? Didn’t that change the rules?
Not in general. Two provisions to do with least-developed countries and
countries that do not have production capacity directly involved changes
to the rules of the TRIPS Agreement. For the main part the declaration
was important for clarifying the TRIPS Agreement’s flexibilities and
assuring governments that they can use the flexibilities, because some
governments were unsure about how the flexibilities would be
interpreted. Let’s focus on the general case first.
OK. What is the general case?
For compulsory licensing, it’s when the generic copy is produced mainly
for the domestic market, not for export.
Is this the same as tearing up the patent?
No. The patent owner still has rights over the patent, including a right
to be paid for the authorized copies of the products.
Does there have to be an emergency?
Not necessarily. This is a common misunderstanding. The TRIPS Agreement
does not specifically list the reasons that might be used to justify
compulsory licensing. However, the Doha Declaration on TRIPS and Public
Health confirms that countries are free to determine the grounds for
granting compulsory licences.
The TRIPS Agreement does list a number of conditions for issuing
compulsory licences, in Article 31. In particular:
normally the person or company applying for a licence has to have
tried to negotiate a voluntary licence with the patent holder on
reasonable commercial terms. Only if that fails can a compulsory licence
be issued, and
even when a compulsory licence has been issued, the patent owner has
to receive payment; the TRIPS Agreement says “the right holder shall be
paid adequate remuneration in the circumstances of each case, taking
into account the economic value of the authorization”, but it does not
define “adequate remuneration” or “economic value”.
There’s more. Compulsory licensing must meet certain additional
requirements: it cannot be given exclusively to licensees (e.g. the
patent-holder can continue to produce), and it should be subject to
legal review in the country.
You said “normally” …
Yes, this is where the confusion about emergencies arises. For “national
emergencies”, “other circumstances of extreme urgency” or “public
non-commercial use” (or “government use”) or anti-competitive practices,
there is no need to try first for a voluntary licence. It’s the only
instance when the TRIPS Agreement specifically links emergencies to
compulsory licensing: the purpose is to say that the first step of
negotiating a voluntary licence can be bypassed in order to save time.
But the patent owner still has to be paid.
Who decides whether the payment is “adequate”?
The authorities in the country concerned. The TRIPS Agreement says the
patent owner must be given the right to appeal in that country as well.
And that’s always been the case under the TRIPS Agreement? What has
Yes, it’s always been the case. What has changed is a provision that
used to say that compulsory licences must be granted mainly to supply
the domestic market (paragraph (f) of Article 31). The 2001 Doha
Ministerial Conference decided that this should be changed so that
countries unable to manufacture the pharmaceuticals could obtain cheaper
copies elsewhere if necessary.
The legal means of making the change was agreed on 30 August 2003 when
the General Council decided to waive the provision, allowing generic
copies made under compulsory licences to be exported to countries that
lack production capacity, provided certain conditions and procedures are
All WTO member countries are eligible to import under this decision, but
23 developed countries are listed in the decision as announcing that
they will not use the system to import: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland,
Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal,
Spain, Sweden, Switzerland, United Kingdom and the US. Since they joined
the EU, the list now includes 10 more: Czech Republic, Cyprus, Estonia,
Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia.
As recorded in a separate statement that is not part of the waiver, 11
other members announced voluntarily that they would only use the system
as importers in situations of national emergency or other circumstances
of extreme urgency: Hong Kong China, Israel, Korea, Kuwait, Macao China,
Mexico, Qatar, Singapore, Chinese Taipei, Turkey, and United Arab
So all obstacles have been removed?
Not entirely. The WTO waiver on its own is not enough. To use the system,
potential exporting countries probably have to change their laws too.
This is where their laws complied with the original TRIPS provision by
requiring production under compulsory licensing to be predominantly for
the domestic market. So far Norway, Canada, India and the EU have formally informed the TRIPS Council that they have done so.
And least-developed countries?
They can now delay protecting pharmaceutical patents until 2016. So long
as a medicine is not patented in a least-developed country, the
government does not need to issue a compulsory licence to import. But
the supplying country would have to issue a compulsory licence to export
a generic copy of a medicine that is patented in that country.
Just to be clear, if a compulsory licence is issued it could be under
the original TRIPS Agreement and not under the newer 2003 decision?
Correct. The 2003 decision (sometimes called the “Paragraph 6” decision
because it refers to that that paragraph of the Doha declaration) only
deals with compulsory licences to produce for export. Many news stories
are about the possibility of issuing compulsory licences to supply
domestic markets. That was always possible.
> More frequently-asked
questions on TRIPS