(See also: http://www.cptech.org/ip/health/cl/recommendedstatepractice.html. Comments or suggestions to love@cptech.org)

  1. In countries where the costs of litigation is an important barrier to the use of compulsory licensing, the system should be based upon an administrative process, to the extent permitted under the national legal system. This of course is allowed under Articles 31h, 31j, 31k, and 44.2.
  2. The government should have at least as strong as rights to authorize use for public purposes as does the US government under 28 USC 1498. That is, government should have the right to use any patent, and to authorize any third party to use any patent, for any government purpose, without a hearing, without a finding, without a license, and subject only to the payment of compensation.
  3. In no cases of the government authorizing non-voluntary use of a patent should the patent owner have the right to enjoin the government or a private party from acting. This no-injunction policy is permitted under Article 44.2 of the TRIPS.
  4. Compensation should be determined by an administrative process, and should be guided by royalty guidelines, which set out recommended royalty rates, based upon net sales of the generic product. The royalty guidelines should be a range of possible royalties. CPT has recommended 0 to 8 percent, depending upon a range of factors (see attachment below). The fact that the government has to choose the rate satisfies the case by case requirement in Article 31.a of the TRIPS.
  5. Compensation decisions should be forward looking, including revisions based upon appeals, to lower the risks by third parties using non-voluntary authorizations.
  6. The compensation system should permit the consolidation of multiple patents on the same product, in such a way that the generic company pays into a single fund, and the various patent owners have to resolve, at their own expense, who gets what share of the proceeds. Arbitration can settle intra-patent owner disputes.
  7. For non-voluntary licenses that are for the commercial market, and require prior negotiation, the procedure should have as a guideline no more than six months to negotiate a voluntary license. This period should not be binding on either party, however, and with good cause, a generic company should be able to proceed with a request before the period.
  8. Where the government determines there is an urgent public health crisis and the patents address a public health concern, the government should have the right to waive requirements for prior negotiation for even commercial uses, as is permitted under 31.b.

Attachment on Royalty Guidelines

`(f) ROYALITY GUIDELINES. In order to provide guidance to patent owners, investors and competitive suppliers of health care inventions, regarding the range of royalties on licenses for patents on medicines that would normally be considered reasonable, and are also consistent with adequate access to medicines, the Minister shall publish royalty guidelines. Such guidelines should include recommendations for compensation as a percent of net sales of products. The initial guidelines, which may be modified by the Minister as needed, are as follows.

`(1) two to three percent for a product that does not represent a significant advance in therapeutic benefits,

`(2) five percent for an innovative product that provides a significant advance in therapeutic benefits;

`(3) for products that are particularly innovative, based upon therapeutic evidence, or for which there was a significantly higher than average investment in R&D, based upon economic evidence, an additional royalty premium or up to three percent.

`(4) one percent or less for patents that represent minor contributions to a product, such as a formulation patent,

`(5) in cases of multiple patents on the same product, the amounts in (1) through (4) are the combined compensation for all patents, allocated fairly among the various patent owners in accordance with the relative significance and benefits of the inventions.

Attachment on 28 USC 1498

Sec. 1498. Patent and copyright cases

(a) Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture. . . .

For the purposes of this section, the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States.


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