Compulsory licenses are licensees that are granted by a government to use patents, copyrighted works or other types of intellectual property. The United States government has several specific statutes for compulsory licensing covering a wide range of topics, as well as more general authority for compulsory licensing under antitrust and eminent domain laws. Other countries have their own approaches to compulsory licensing.
Compulsory licenses are an essential government instrument to intervene in the market and limit patent and other intellectual property rights in order to correct market failures. The authority to issue a compulsory license is important, even when the right isn't exercised, because it may temper the exercise of market power or the abuse of a patent.
Governments issue compulsory licenses to broaden access to technologies and information in order to achieve a number of public purposes. For example, National Public Radio (NPR) recently was granted compulsory licenses for noncommercial educational broadcasting use of the repertoires of the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI). The Clean Air Act provides for compulsory licensing of patents related to air pollution. Antitrust authorities seek compulsory licenses as remedies for problems of monopoly or anticompetitive practices. The National Institutes of Health is examining compulsory licenses in order to facilitate broader dissemination of biotechnology "research tools." Many countries have provisions in laws for compulsory licensing if the patent owner refused to make the invention available (failure to "work" the patent), for dependent patents, or for various public interest reasons, such as to correct cases where pharmaceuticals are "available to the public in insufficient quantity or at abnormally high prices." (France).
Patents and other intellectual property rights are creations of government policy. In writing about a German compulsory license related to the development of interferon, Michael Kern wrote: "One should not forget that patents represent a interventionist instrument, ultimately for the sake of community welfare. Thus intervention to restrict some of the effects of patents may be required, when the community welfare is [no] longer served."
Nations currently have the right to issue compulsory licenses on patents and copyrights. The Paris Convention for the Protection of Industrial Property plainly states "each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work."
The World Trade Organization provisions on intellectual property are contained in the agreement on trade related aspects of intellectual property, known as TRIPS. The TRIPS provides for compulsory licenses of patents in Article 31, but also provides a number of restrictions on the use of compulsory licenses. The North American Free Trade Agreement (NAFTA) has its own provisions for compulsory licensing of patents, which are somewhat more restrictive than those in the TRIPS. In earlier drafts of the OECD's proposal for a Multinational Agreement on Investments (MAI), there was language to limit compulsory licensing of patents much more severely. Compulsory licenses would only be used "to remedy an alleged violation of competition laws." After broad opposition to the MAI, negotiations were suspended.
The Pharmaceutical Research and Manufacturers Association (PhRMA) and the International Federation of Pharmaceutical Manufacturers Associations (IFPMA) are actively lobbying the United States and the European Union trade officials to support international treaties and policies that would ban or restrict the use of compulsory licensing for medicines.
The United States uses considerable bilateral pressure to stop developing countries from using compulsory licensing for pharmaceuticals. For example, the US is actively pressuring South Africa and Thailand against the use of compulsory licenses of pharmaceuticals to treat AIDS or tropical diseases.
It is anticipated that disputes concerning compulsory licensing will eventually come before the WTO in the dispute resolution framework. Pubic health organizations want the WTO to recognize the primacy of public health concerns in the resolution of these disputes, and for the WTO to consult with the World Health Organization (WHO). PhRMA and the IFPMA want these disputes to be framed as commercial disputes, and they oppose the involvement of the WHO.
Each country will have its own priorities for compulsory licensing. In the United States and Europe, there is much interest in compulsory licensing for broad biotechnology patents, research tools, dependent patents, and as a remedy for unreasonable prices. In developing countries there is much interest in the use of compulsory licensing to obtain lower prices pharmaceuticals for AIDS, tropical illnesses, various vaccines and other essential medicines.
To find out a lot more about compulsory licenses, see: http://www.cptech.org/ip/health/cl/.