[Federal Register: December 30, 1994]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 95
[FRL-5131-5]

Mandatory Patent Licenses Under Section 308 of the Clean Air Act

AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.



SUMMARY: On occasion, a party attempting to comply with a standard of 
the Clean Air Act [CAA] may be unable to meet the standard without 
resort to a patented technology. CAA section 308 provides a mechanism 
by which such a non-complying party may obtain a patent license where 
it has been unsuccessful in its attempts to obtain a license on its 
own. Under CAA section 308, the United States may require the owner of 
the patented technology to grant the non-complying party a patent 
license in exchange for a reasonable royalty if the patented technology 
is necessary to meet the requirements in certain sections of the CAA.
    The North American Free Trade Agreement (NAFTA) imposes certain 
limits on the ability of the United States to force patent owners to 
grant licenses under their patents. Section 104(b) of the North 
American Free Trade Implementation Act requires EPA to issue a 
regulation conforming CAA section 308 with the mandatory patent 
licensing restrictions found in NAFTA article 1709(10).
    EPA is issuing this rule to ensure that EPA's implementation of CAA 
section 308 conforms with the requirements of NAFTA article 1709(10). 
The rule establishes the policies and procedures EPA will follow prior 
to applying to the Attorney General for a mandatory license under a 
patent covering a technology necessary to enable compliance with the 
new stationary sources standards, hazardous air pollutants standards, 
or motor vehicle emission standards of the CAA.


EFFECTIVE DATE: January 30, 1995.


ADDRESSES: Materials relevant to this rulemaking are contained in EPA 
Air Docket No. A-94-51: Environmental Protection Agency, 401 M Street, 
SW., Washington, DC 20460. The Air and Radiation Docket and Information 
Center is located in room M-1500, Waterside Mall (Ground Floor) 
Environmental Protection Agency, 401 M Street, SW., Washington, DC 
20460. Dockets may be inspected from 9 a.m. to 4 p.m., Monday through 
Friday, except Federal holidays. A reasonable fee may be charged for 
copying docket materials.


FOR FURTHER INFORMATION CONTACT: Thomas Gorman, Patent Counsel (Mail 
Code 2379), Office of General Counsel, U.S. Environmental Protection 
Agency, 401 M Street SW., Washington, DC 20460. Phone: (202) 260-1339.


SUPPLEMENTARY INFORMATION:


I. Authority


    This rule is promulgated under the authority of CAA section 308, as 
amended, 42 U.S.C. 7608, and the North American Free Trade Agreement 
Implementation Act, Public Law No. 103-182, section 104, 107 Stat. 
2057, 2064 (1993).


II. Background


    Section 308 of the Clean Air Act provides for mandatory licensing 
of patented technologies needed to meet certain CAA requirements. Under 
section 308, the United States can require the owner of a patented 
technology that is necessary to enable another party's compliance with 
certain limitations of the Clean Air Act to permit the other party to 
practice the patented technology in exchange for a reasonable royalty 
set by a Federal court. In order to compel the licensing of a patent 
under section 308, the EPA Administrator must ask the Attorney General 
to certify to a Federal district court that the following conditions 
are satisfied:

    (a) The patent must be necessary for compliance with the standards 
of the CAA sections 111, 112 or 202;

    (b) The patent right must be actively in use or intended for public 
or commercial use and not otherwise reasonably available;
    (c) No reasonable alternatives to licensing the patent can exist 
for meeting the specified CAA standards; and
    (d) Failure to license the patent may cause reduced competition or 
monopoly conditions in any area of trade.
    Upon certification of the above conditions to a Federal district 
court by the Attorney General, the court may then order the patent 
holder to license the patent under terms and conditions determined by 
the court after a hearing.

    Chapter 17 of the NAFTA addresses intellectual property issues 
generally and article 1709 addresses patents specifically. NAFTA 
article 1709 promotes the availability of patent protection for a broad 
range of inventions and also limits the scope of permissible violations 
of patent rights. The latter function is performed by paragraph 10 of 
article 1709, which sets conditions for violating a patent holder's 
right to decide the conditions for practice of the holder's patent.
    NAFTA Article 1709(10) sets specific conditions that must be met by 
the compulsory patent licensing statutes of any member country. The 
conditions are as follows:

    (a) Authorization of each compulsory license of a patent must be 
considered on the individual merits;

    (b) Any proposed compulsory licensee already must have made efforts 
to obtain authorization from the patent holder;
    (c) The scope and duration of an authorized compulsory patent 
license must be limited;

    (d) An authorized compulsory patent license must be non-exclusive;
    (e) An authorized compulsory patent license must be non-assignable;
    (f) An authorized compulsory patent license must be predominantly 
for supply of the domestic market;

    (g) The authorization of the compulsory patent license must be 
terminable when the circumstances that led to the authorization cease 
to exist;

    (h) Patent holders must be paid adequate compensation;
    (i) Authorization decisions must be subject to judicial or other 
independent review;

    (j) Compensation rates must be subject to judicial or other 
independent review;

    (k) When an authorized compulsory use is necessary to remedy a 
practice determined after judicial or administrative process to be 
anti-competitive, a member country is allowed greater latitude in 
applying conditions (a)-(j), including noncompliance with conditions 
(b) and (f); and

    (l) Authorization of the use of a patent in order to permit 
exploitation of another patent shall not be granted except as a remedy 
for an adjudicated violation of laws directed against anti-competitive 
practices.

    No direct conflict exists between NAFTA article 1709(10) and CAA 
section 308. However, section 308 does not address a number of the 
NAFTA conditions. The following rule establishes the policies and 
procedures that EPA will follow before applying to the Attorney 
General, pursuant to CAA section 308, for a mandatory license under a 
patent covering a technology necessary to enable compliance with CAA 
sections 111, 112 or 202. The procedures in the rule ensure that EPA's 
implementation of CAA section 308 will conform to article 1709(10) of 
the NAFTA.

    Section 95.1 of the rule sets forth definitions of a number of 
terms used in the rule. Section 95.2 identifies who is entitled to 
petition the EPA for a mandatory patent license under section 308 and 
the required contents of such petitions. Section 95.3 identifies 
findings that EPA will have to make prior to making application to the 
Attorney General for a mandatory patent license under CAA section 308. 
These findings reflect the requirements of CAA section 308 and NAFTA 
Article 1709(10). Section 95.4 of the rule sets forth certain 
limitations that will be included in all mandatory patent licenses for 
which EPA makes application to the Attorney General under CAA section 
308. These limitations are in accord with the requirements of CAA 
section 308 and NAFTA article 1709(10).
    EPA published this rule in a notice of proposed rulemaking 
published on August 29, 1994 (59 FR 44390). EPA received three comments 
in response to the notice of proposed rulemaking. Each of the three 
comments expressed the concern that the proposed rule might be used to 
require mandatory licensing of patented products or processes that are 
only marginally related to reducing air pollution. Each comment 
suggested that the language of the proposed rule should be amended to 
state that mandatory patent licenses under CAA section 308 may be 
required only for patents relating to air pollution control.
    This rule is not intended to limit the technologies for which 
mandatory patent licenses may be sought under CAA section 308 more than 
is already provided in CAA section 308. That is, the technology must be 
necessary to enable compliance with CAA section 111 (new stationary 
sources standards), section 112 (hazardous air pollutants), or section 
202 (motor vehicle emission standards). However, EPA notes that under 
the rule, the EPA Administrator may apply to the Attorney General for a 
mandatory patent license pursuant to CAA section 308 only after 
expressly finding that the patented technology is not otherwise 
reasonably available, and that there are no other reasonable 
alternatives for accomplishing compliance with CAA section 111, 112 or 
202. These requirements help ensure that a mandatory patent license 
will not be ordered pursuant to this rule where the patent is only 
marginally related to meeting the standards of the CAA.


III. Procedural Requirements


A. Review Under Executive Order 12866


    Under Executive Order 12866 (58 FR 51735 (October 4, 1993)), the 
EPA must determine whether the regulatory action is ``significant'' and 
therefore subject to review by the Office of Management and Budget 
(OMB), and the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may: (1) Have an annual effect on the economy of $100 million 
or more or adversely affect in a material way the economy, a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs, or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order.

    Pursuant to the terms of Executive Order 12866, it has been 
determined that this rule is not ``significant'' because none of the 
listed criteria apply to this action. Consequently, this action was not 
submitted to OMB for review under Executive Order 12866.


B. Review Under the Regulatory Flexibility Act


    This rule was reviewed under the Regulatory Flexibility Act of 
1980, Pub. L. 96-354, which requires preparation of a regulatory 
flexibility analysis for any rule which is likely to have significant 
economic impact on a substantial number of small entities. Pursuant to 
section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), EPA 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities. The rule codifies the existing 
procedures for application of CAA section 308 and imposes no new 
impacts on large or small entities. Therefore, no regulatory 
flexibility analyses has been prepared.


D. Review Under the Paperwork Reduction Act


    The information collection requirements in this rule have been 
submitted to the Office of Management and Budget (OMB) under the 
requirements of the Paperwork Reduction Act, 44 U.S.C. 3501, et seq. An 
Information Collection document has been prepared by EPA (ICR No. 
1714.01), and a copy may be obtained from Sandy Farmer, Information 
Policy Branch, EPA Mail Code 2136, 401 M Street SW., Washington, DC 
20460, or by calling (202) 260-2740.

    The public reporting burden for this collection of information 
would be a one-time burden for each petitioner. The burden was 
estimated on the basis of the number of hours needed to complete a 
single petition, along with the associated cost.
    Completing a petition was estimated to require 21 hours at a cost 
of $1482. This includes time for reviewing instructions, gathering 
materials supporting the patent license, identifying other interested 
parties, and composition of a statement of facts upon which the 
petition is based. EPA received no comments regarding this information 
collection requirement. ICR No. 1714.01 was approved by OMB, Control 
Number 2060-0307, on October 3, 1994. Unless renewed, ICR No. 1714.01 
will expire on October 31, 1997.


List of Subjects in 40 CFR Part 95


    Environmental protection, Administrative practice and procedure, 
Air pollution control, Inventions and patents, Patent licensing, North 
American Free Trade Agreement (NAFTA), Reporting and recordkeeping 
requirements.


    Dated: December 23, 1994.

Carol M. Browner,

Administrator.


    Title 40, Code of Federal Regulations, is amended by adding part 95 
as follows:


PART 95-MANDATORY PATENT LICENSES


Sec.

95.1  Definitions.

95.2  Petition for mandatory license.

95.3  Findings prior to application to Attorney General.
95.4  Limitations on mandatory licenses.


    Authority: 42 U.S.C. 7609; Sec. 104, Pub. L. 103-182, 107 Stat. 
2057, 2064.



Sec. 95.1  Definitions.


    (a) As used in this part, all terms not defined in this section 
shall have the meaning given them by the Act.
    (b) Act means the Clean Air Act, as amended (42 U.S.C. Secs. 7401-
7671).

    (c) Agency means the Environmental Protection Agency.
    (d) Administrator means the Administrator of the Environmental 
Protection Agency.



Sec. 95.2  Petition for mandatory license.


    (a) Any party required to comply with sections 111, 112 or 202 of 
the Act (42 U.S.C. 7411, 7412 or 7521) may petition to the 
Administrator for a mandatory patent license pursuant to section 308 of 
the Act (42 U.S.C. 7608), under a patent that the petitioner maintains 
is necessary to enable the petitioner to comply with Sections 111, 112 
or 202 of the Act.

    (b)(1) Each petition shall be signed by the petitioner and shall 
state the petitioner's name and address. If the petitioner is a 
corporation, the petition shall be signed by an authorized officer of 
the corporation, and the petition shall indicate the state of 
incorporation. Where the petitioner elects to be represented by 
counsel, a signed notice to that effect shall be included with the 
petition at the time of filing.

    (2) Each petition shall include a copy of the patent under which a 
mandatory patent license is sought. The petition shall identify all 
current owners of the patent and shall include a copy of all assignment 
documents relevant to the patent that are available from the United 
States Patent and Trademark Office.

    (3) Each petition must identify any person whose interest the 
petitioner believes may be affected by the grant of the license to 
which the petition is directed.

    (4) Each petition must contain a concise statement of all of the 
essential facts upon which it is based. No particular form of statement 
is required. Each petition shall be verified by the petitioner or by 
the person having the best knowledge of such facts. In the case of 
facts stated on information and belief, the source of such information 
and grounds of belief shall be given. The statement of facts shall 
include the following:

    (i) An identification of the provisions of the Act and/or 
regulations thereunder that the petitioner maintains petitioner will be 
able to comply with if the petitioner is granted the patent license 
that is the subject of the petition;

    (ii) An identification of the nature and purpose of the 
petitioner's intended use of the patent license;
    (iii) An explanation of the relationship between the patented 
technology and the activities to which petitioner proposes to apply the 
patented technology, including an estimate of the effect on such 
activities stemming from the grant or denial of the patent license;
    (iv) A summary of facts demonstrating that the patent under which a 
mandatory patent license is sought is being used or is intended for 
public or commercial use;

    (v) An explanation of why a mandatory patent license is necessary 
for the petitioner to comply with the requirements of sections 111, 112 
or 202 of the Act, and why the patented technology is not otherwise 
available;

    (vi) An explanation of why there are no other reasonable 
alternatives for accomplishing compliance with sections 111, 112 or 202 
of the Act;

    (vii) An explanation of why the unavailability of a mandatory 
patent license may result in a substantial lessening of competition or 
a tendency to create a monopoly in any line of commerce in any section 
of the United States;

    (viii) A summary of efforts made by the petitioner to obtain a 
patent license from the owner of the patent, including the terms and 
conditions of any patent license proposed by petitioner to the patent 
owner; and

    (ix) The terms, if any, on which the owner of the patent has 
proposed to grant the petitioner a patent license.
    (5) Each petition shall include a proposed patent license that 
states all of the terms and conditions that the petitioner proposes for 
the patent license.

    (6) Petitions shall be addressed to the Assistant Administrator for 
Air and Radiation, Mail Code 6101, U.S. Environmental Protection 
Agency, Washington, DC 20460.

    (c) Petitions that do not include all of the information required 
in paragraph (b) of this section shall be returned to the petitioner. 
The petitioner may supplement the petition and resubmit the petition.
    (d) If the Administrator, or the Administrator's designee, finds 
that the criteria in Sec. 95.3 are not met, or otherwise decides to 
deny the petition, a denial of the petition shall be sent to the 
petitioner, along with an explanation of the reasons for the denial.
    (e) If the Administrator, or the Administrator's designee, finds 
that the criteria in Sec. 95.3 are met and decides to apply to the 
Attorney General for a patent license under section 308 of the Act, 
notice of such application shall be given to the petitioner, along with 
a copy of the application sent to the Attorney General.



Sec. 95.3  Findings prior to application to Attorney General.


    The Administrator, or the Administrator's designee, may apply to 
the Attorney General for a mandatory patent license pursuant to section 
308 of the Act (42 U.S.C. 7608) either in response to a petition under 
Sec. 95.2 or on the Administrator's or designee's own initiative, only 
after expressly finding that each one of the following mandatory 
criteria is met:

    (a) The application is for a patent license covering no more than 
one patent;

    (b) The party to whom the proposed patent license is to be granted 
has presented the Administrator or designee with evidence that such 
party has made reasonable efforts to obtain a patent license from the 
patent owner with terms similar to the license terms to be proposed in 
the application to the Attorney General;
    (c) The patent under which a patent license is sought in the 
application to the Attorney General is being used or is intended for 
public or commercial use;

    (d) The mandatory patent license is necessary for a party to comply 
with the requirements of sections 111, 112 or 202 of the Act (42 U.S.C. 
7411, 7412 or 7521);

    (e) The patented technology is not otherwise reasonably available, 
and there are no other reasonable alternatives for accomplishing 
compliance with sections 111, 112 or 202 of the Act (42 U.S.C. 7411, 
7412 or 7521); and

    (f) The unavailability of a mandatory patent license may result in 
a substantial lessening of competition or a tendency to create a 
monopoly in any line of commerce in any section of the United States.



Sec. 95.4  Limitations on mandatory licenses


    (a) If the Administrator, or the Administrator's designee, decides 
to apply to the Attorney General for a mandatory patent license in 
accordance with Sec. 95.3, the application shall include a proposed 
patent license with the following limitations:
    (1) The scope and duration of the patent license shall be limited 
to that necessary to permit the proposed licensee to comply with the 
requirements the Act;

    (2) The patent license shall be nonexclusive;
    (3) The patent license shall be non-assignable, except with that 
part of the enterprise or goodwill that enjoys the license;
    (4) The patent license shall be for use of the licensed technology 
in the United States only;

    (5) The patent license shall extend only to those uses necessary to 
enable the licensee to comply with sections 111, 112 or 202 of the Act 
(42 U.S.C. 7411, 7412 or 7521);

    (6) The patent license shall provide for termination, subject to 
adequate protections of the legitimate interests of the licensed party, 
when the circumstances that made the compulsory patent license 
necessary cease to exist and are unlikely to recur; and
    (7) The patent license shall provide for adequate remuneration that 
takes into account the economic value of the license.
    (b) The Administrator, or the Administrator's designee, may decide 
as appropriate to include additional conditions, terms or limitations 
on the scope of the patent license for which application is made to the 
Attorney General.


[FR Doc. 94-32268 Filed 12-29-94; 8:45 am]
BILLING CODE 6560-50-P