What is patent compulsory licensing?

Underpinning global intellectual property systems is the Paris Convention of 1883 of which the vast majority of countries are members. One aspect of the Convention is the protection of inventions through the grant of patent rights. Such rights provide for a defined period, usually 20 years, in which the patentee enjoys monopoly rights in its invention.

In exchange for receiving its monopoly, the patentee is required to fully disclose and define its invention. By doing so, a patentee fulfils a societal obligation to make its invention available for public use after a patent expires.

But what if a patentee decides not to make use of a patented invention or to licence it to a third party? That is, a patentee withholds public access to an invention?

The Paris Convention recognised the possibility that an invention may not be used (not worked). Specifically, Article 5A created the right for members to take legislative measures to grant non-exclusive compulsory licences to third parties in circumstances where an invention had not been adequately worked. Such licences could only be granted after the later of either four years from a patent application’s filing date or three years from a patent’s grant. Further, although the patentee’s consent was not required, the patentee was required to be adequately compensated.

Global importance of compulsory licensing

There have been very few instances of compulsory licences being issued. However, the Malaysian government issued a compulsory licence in 2017 for Gilead’s hepatitis C treatment, sofosbuvir. Previously in 2003 it had issued a compulsory licence for various drug treatment for HIV/AIDS. These licences where issued on the basis of a failure to agree on product pricing.

With such action by the Malaysian government, it is foreseeable that other countries could easily follow suit or would their local compulsory licensing legislation either prevent or discourage the grant of such licences?

Compulsory licences in Indonesia - up to 3 February 2021

Indonesia is an example of a jurisdiction with a strict local compulsory licensing legislation. Under the Indonesian Patent Law No. 13 (2016), the invention of the patent must have been implemented (worked) within three years of the date of grant. If the invention was not worked before this date, the invention may be subject to a compulsory licence by a third party. While this requirement is relatively strict compared to other jurisdictions the goal of this requirement was to support technology transfer, investment and provide employment opportunities for the local community.

As a compromise for this strict requirement, the government included a provision so that patentees were able to file a request to postpone this working requirement obligation for up to five years, provided supporting documents outlining the reasons for the request were also provided. Examples of reasons that were considered acceptable by the Indonesian government include the complexity of invention, insufficient domestic production capacity and lack of relevant materials, technology or human resources.

While a patent that is not worked will not automatically be revoked, a public prosecutor or a third party that represents national interests can request for the patent’s revocation. Therefore, prior to 3 February 2021 filing the request to postpone the working requirement was recommended (if required).

Compulsory licences in Indonesia - from 3 February 2021

The law has recently changed so that under Indonesian Law No. 11 Year 2020 and the Ministerial Regulation No. 14 Year 2021, the request to postpone the working requirement can no longer be filed. Therefore, if the invention is not worked within three years of the date of grant, the patent may be subject to a compulsory licence by a third party. The amendments to the law were effective on 3 February 2021 and any requests to postpone filed after this date will not be processed or valid.

There is no requirement for patentees or licensees to submit evidence of the working of the invention in Indonesia. However, if a third party requests a compulsory licence, the onus is on the patentee/licensee to provide evidence that the invention has been worked within the three years from the date of grant.

Note - the Indonesian government has now expanded their definition of “worked” to include making, importing and licensing the patented products (or products resulting from the patented process/systems).

Again, while a patent that is not worked will not automatically be revoked it is important to ensure that the working requirement is satisfied to avoid the possibility of the patent being subjected to a compulsory licence.

Key takeaways about patent compulsory licensing

Patents exist to foster innovation and therefore benefit society. However, there are monopolies and as such may be regarded as anti-competitive. The scope and duration of patents is carefully defined. By providing a compulsory licencing regime, there is on the one hand an encouragement for the patentee to make its invention available whilst on the other hand allowing for third parties to access a patent and make it available to the public if the patentee fails in its obligations. Whilst compulsory licences have proven to be rarely accessed so far, we predict that the amendments to the Indonesian law suggest a move to make use of these licences more generally.