Public Health and Compulsory License

July 1, 2009
HARAKENZO World Patent & Trademark
Patent Attorney Mitsuko YAMAGUCHI

It was reported that, in response to the WHO (World Health Organization) decision to raise the pandemic alert level of a new influenza to the phase 5, the Korean government determined a policy for issuing a compulsory license to allow domestic drug companies to manufacture antiviral agents for the new influenza in case that the new influenza viruses rapidly spread and the anti-virus agents could not be supplied sufficiently (5).
Although the new influenza continues to spread thereafter, the symptoms are seemed to be relatively mild at this point, and the compulsory license is not issued yet.

In a compulsory license, a government forcibly grants to a third party, who is not the patentee, the right of implementing a patented invention without the patentee’s authorization. For example, in a country where a drug is patented, only the patentee and the licensee to whom the patentee has granted the license are permitted to implement the invention (e.g., manufacture or sell the drug). However, a compulsory license allows a government etc. to forcibly grant the license to a third party even if the patentee does not authorize that.

A patent system is a system for promoting the development of industry while balancing the benefit of a patentee with the benefit of the public, by giving, for a fixed period, a patent right as an exclusive right to a person who has invented a new technology, in return for the publication of the invention in the patent application, and by restricting the public’s implementation of the invention for the fixed period, in return for enabling the public to use the published technology. On this account, since an invention does not contribute to the development of industry in case of failure to work the invention, a compulsory license will be issued as a penalty. Further, considering the fact that a patent right is an exclusive right, the measure of restricting the right is required in case it is disservice to the public.
For this reason, the compulsory license was provided from long ago, as a penalty imposed to a patentee in case of failure to work an invention, and for the public necessity. In the old Japanese Patent Law (enforced in 1922), the compulsory license and the forfeiture of a patent were provided (1). However, the current Japanese Patent Law has abolished the forfeiture of a patent for the following reasons: originally an inventor can keep confidential his/her invented technology; just the publication of an invention constitutes a certain contribution; and, if an obligation to work an invention is strong, invented technologies may be concealed (4).

Internationally, Article 5A(2), (3), and (4) of the Paris Convention set out a penalty for failure to work, within the agreement reached in the Brussels revision conference (1990) and the Lisbon revision conference (1958). Article 5A(2) reads: “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.” This provision is for failure to work rather than for the public necessity. However, it is interpreted that each country of the Union of the Paris Convention can freely issue a compulsory license for the public necessity (3).

Concerning the amendment of the provision regarding the penalty for failure to work in the Paris Convention, developed countries had insisted that a compulsory license should be issued in a limited way, whereas developing countries had insisted that a compulsory license should be issued flexibly. Due to the conflict of opinions between them, the arguments had been in a stalemate for a long time (2). After such the situation, the requirements that each member shall comply with in developing domestic systems regarding the compulsory license were specified in the TRIPS agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights), which went into effect in 1995 along with the establishment of the WTO (World Trade Organization) based on the final agreement of the GATT (General Agreement on Tariffs and Trade) Uruguay Round (2)(7).
Article 31 of the TRIPS agreement prescribes the requirements that each member shall comply with in developing domestic systems regarding “Other Use Without Authorization of the Right Holder”, which includes the compulsory license and has a wider concept. The requirements are, for example, as follows:
- Prior to the issue of a compulsory license, the proposed user shall make efforts to obtain authorization for the license from the right holder and such efforts were not successful (Article 31(b));
- The scope and duration of such use shall be limited to the purpose for which it was authorized (Article 31(c));
- Such use shall be non-exclusive (Article 31(d));
- Any such use shall be authorized for the supply of the domestic market of the Member authorizing such use (Article 31(f)); and
- The right holder shall be paid adequate remuneration (Article 31(h)).
The requirement of Article 31(b) may be waived in case of national emergency or extreme emergency, or in case of public non-commercial use.

In accordance with Article 31 of the TRIPS agreement, a compulsory license was issued for the patent rights of HIV/AIDS drugs, which had been a serious problem in the public health. Another example is as follows: In preparation for a possible outbreak of H5N1 influenza, Taiwan announced in 2005 a policy for issuing a compulsory license to allow drug manufacturers to produce antiviral agents for H5N1 influenza, on condition that this was applied only to a situation where the antiviral agents were not supplied sufficiently.

Thereafter, there was a movement concerning Article 31 of the TRIPS agreement. Since Article 31(f) limits other use to the supply of the domestic market of the member authorizing such use, there was a problem that a country incapable of manufacturing drugs could not use this rule. In order to deal with this, the WTO General Council meeting, held in August 2003, decided to waive the requirement of Article 31(f) under a certain condition, until the TRIPS agreement regarding the exporting to foreign countries the drugs manufactured in accordance with the compulsory license was amended. The present situation is that, the negotiations on the draft amendment reached agreement, and the protocol amending the TRIPS agreement was released so that the members ratify it. In response to this, Canada, Norway, EU, Korea, India, and other members are developing domestic systems for the amendment (7).

The Japanese government deposited the instrument of ratification on August 31, 2007. However, the relevant domestic low is not revised yet. The Japanese Patent Law provides, in Section 93, a compulsory license (arbitrary license) which is to be issued for the public necessity. An arbitrary license prescribed in Section 93 of the Japanese Patent Law has never been issued. In many other countries also, a compulsory license has hardly been issued. It seems that the issue of a compulsory license for the public health has been considered as a problem only in developing countries. However, now that a pandemic outbreak of H5N1 influenza and bioterrorism can occur, a developed country also may face a situation that the issue of a compulsory license is required. In case that the issue of a compulsory license is required, I doubt if Section 93 of the Japanese Patent Law can be used as speedily as required.

Reference
1. Japan Patent Office ed., “Kougyo shoyuuken ho chikujo kaisetsu [Instruction on Articles of Industrial Property Law]”
2. Kousaku YOSHIFUJI, Kenichi KUMAGAI (revised and enlarged), “Tokkyo ho gaisetsu (11th version) [Instruction on Patent Law]”
3. Bodenhausen, “Paris Convention For The Protection Of Industrial Property” (Japanese edition)
4. Nobuhiro NAKAYAMA, “Kougyo shoyuuken ho, Tokkyo ho (1st volume, 2nd version) [Industrial Property Law, Patent Law]”
5. http://rki.kbs.co.kr/japanese/news_detail.htm?No=33767
6. Yoshifumi ARAKI, “Zukai TRIPS kyotei [Illustrated TRIPS Agreement]”
7. International Association for the Protection of Industrial Property of Japan, “WTO koushu eisei ni kansuru 2003-nen goui wo fumaeta kakkoku no kokunai seido seibi jokyo, chousa kenkyuu houkokusho (March, 2007) [Study and Research on Progress in the Development of Domestic Systems Based on the WTO Decision of August 30, 2003 on Public Health]”