Compulsory Licensing in North America
(a) Declaration of public interest
The Commission may, after giving the patent owner an opportunity for a hearing, declare any patent to be affected with the public interest if (1) the invention or discovery covered by the patent is of primary importance in the production or utilization of special nuclear material or atomic energy; and (2) the licensing of such invention or discovery under this section is of primary importance to effectuate the policies and purposes of this chapter.
(b) Action by Commission
Whenever any patent has been declared affected with the public interest, pursuant to subsection (a) of this section - (1) the Commission is licensed to use the invention or discovery covered by such patent in performing any of its powers under this chapter; and (2) any person may apply to the Commission for a nonexclusive patent license to use the invention or discovery covered by such patent, and the Commission shall grant such patent license to the extent that it finds that the use of the invention or discovery is of primary importance to the conduct of an activity by such person authorized under this chapter.
A 1998 Lexis search turned up 438 cases that cite this statute. A note by NASA describes this provision as follows:
. . . 28 U.S.C. 1498, which provides that a suit against the Government in the U.S. Court of Federal Claims is the exclusvie remedy for patent holders who allege their patented invention has been infringed by the U.S. Government or by one acting for the Government. The primary purpose of this statute is to protect and relieve contractors from any liability for infringement by the owner when an invention is used by or manufactured for the United States. By virtue of this statute, the Government may be held liable to the patent owner for payment of the "reasonable and entire compensation" for its unauthorized use of the patent. Unlike a private party, however, the Government cannot commit the tort of "patent infringement." Governmental use of a patented invention is viewed as an eminent domain taking of a license under the patent and not as a tort.
The Government may delegate its eminent domain power over patents to contractors acting on its behalf. This is accomplished through inclusion of the "Authorization and Consent" clause in the contract [FAR clause 52.227-1]. This clause is usually included in research and development contracts and is a very significant power to grant to a contractor as it makes the Government responsible for the contractors' infringement of any patents during the course of performance of the contract; the patent owner must bring her/his action against the Government, not the contractor.
Sometimes the Government does not wish to fully delegate its eminent domain power to a contractor. This is accomplished by inclusion in the contract of the "Patent Indemnity" clause [FAR clause 52.227-3] which obligates the contractor who infringes a patent to indemnify the Government for any liability it incurs.
My essential pharmaceuticals bill would, rather than outright canceling a patent, provide for subjecting a patent for a pharmaceutical to a compulsory-licensing procedure, akin to that now in place with respect to music copyrights. Where [HHS] determines (1) that a patent holder 'has not taken all the reasonable steps toward the commercial marketing' of the patented drug and (2) that the 'availability of the product to the public is of vital importance to the public health or welfare,' any pharmaceutical company could manufacture and sell the drug. A company that did so would be required to pay royalties, in an amount to be determined by the Commissioner of Patents and Trademarks to represent fair compensation to the patent holder."
The proposed Final Judgment directs Miller Industries to offer, until the expiration of the ten-year term of the decree, to any third party requesting it a non-exclusive license for any one or more of: (1) the L-Arm patent, (2) certain specified claims of the Vulcan Improvement Patents, that allow the L-Arm to pivot horizontally and vertically, (3) the Backsaver patent, and (4) the IRL patent.
The license agreement gives Wheeling-Nisshin a non-exclusive, irrevocable license to make, use, and sell aluminized stainless steel in North America. The agreement allows Wheeling-Nisshin to make aluminized stainless steel using AK Steel's and Armco's patented processes, or any other process.
The proposed consent agreement signed by the firms to settle these charges, announced today for public comment, would require the merged firm to divest Pharmacia's 9-AC assets to a Commission-approved buyer to ensure that research and development will continue. The National Cancer Institute must approve the buyer as well. The settlement would require the divestiture to be completed within 12 months. Further, if the divestiture is not completed within 12 months, the Commission would be permitted to appoint a trustee to divest the 9-AC assets, including an exclusive license to 9-AC in the United States as well as an exclusive or nonexclusive license to market 9-AC in the rest of the world. In addition, the consent agreement would require the merged firm to provide technical assistance and advice to the acquirer toward continuing the research and development of 9-AC.In 1997 the FTC approved a divestiture of the research and development assets related to 9-AC. to IDEC Pharmaceuticals Company. The divestiture was an alternative to a compulsory license.
[This} is a case in which, we alleged that a patent license agreement between the defendants violated Section 1 of the Sherman Act. Johnson dominated the highly concentrated U.S. household insecticide market. Bayer developed and patented a new active ingredient for household insecticides and prepared to enter the U.S. market with its own product. It then abandoned its plans and granted a license for its active ingredient to Johnson. It did not license any other U.S. manufacturer. The case was settled by consent decree, which in part requires Bayer to license its ingredient to other interested parties for the United States.
The extraordinary remedy in Dell must clearly be perceived by the public as appropriate in order to avoid international treaty consequences and unintended chilling on needed participation by private industry in standard setting. . .In another pleading, the FTC explained the case as follows:
The appearance of a United States government agency imposing a compulsory patent license, especially a royalty-free compulsory license, must be avoided except in response to egegious conduct. Other countries could cite such an action as the basis for imposing broad and onerous compulsory licensing requirements upon United States patentees abroad.
For these reasons, AIPLA urges the FTC to act with caution in this case. The FTC should explicitly state in the order that it is not intending that this remedy or this action be the standard response in a patent enforcement action involving industry standards.
the FTC charged that Dell Computer Corporation restricted competition in the personal computer industry and undermined the standard-setting process by threatening to exercise previously undisclosed patent rights against computer companies adopting the VL-bus standard, a mechanism to transfer instructions between the computer's central processing unit and its peripherals, such as a hard disk drive or video display hardware. . .
After the VESA VL-bus design standard became successful and computer manufacturers had sold more than 1.4 million personal computers incorporating the VL-bus, Dell contacted certain VESA members and asserted that it had obtained a patent in 1991 that they were violating by using the VL-bus standard. To settle the FTC's charges, Dell agreed not to enforce its patent rights against computer manufacturers using the VL-bus.
The model suggesting that production and dissemination of valuable, protectible works is directly related to the degree of available intellectual property protection is much too simplistic. In fact, history teaches us a more equivocal lesson. Whenever we have discovered or enacted a copyright exception, an industry has grown up within its shelter. Player piano rolls became ubiquitous after courts ruled that they did not infringe the copyright in the underlying musical composition; phonograph records superseded both piano rolls and sheet music with the aid of the compulsory license for mechanical reproductions; the jukebox industry arose to take advantage of the copyright exemption accorded to "the reproduction or rendition of a musical composition by or upon coin-operated machines." Composers continued to write music, and found ways to exploit these new media for their works. . . The videotape rental business swept the nation shielded from copyright liability by the first sale doctrine. . . Cable television began spreading across America with the aid of a copyright exemption;(80) it eclipsed broadcast television while sheltered by the cable compulsory license.
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