THE ISSUE OF BALANCING RIGHTS IN THE PATENT PROTECTION

Transcription

1 THE ISSUE OF BALANCING RIGHTS IN THE PATENT PROTECTION FINAL REPORT JPO FUND RESEARCH FELLOWSHIP PROGRAM 01 October, March, 2003 Prepared by: TA QUANG MINH VIETNAM TOKYO February, 2003

2 TABLE OF CONTENTS Acknowledgement.. i Introduction 1 Chapter 1. Principle of balancing rights in the patent protection 5 Introduction Principle of balancing rights in the patent protection under the TRIPS Agreement Conditions for granting patent rights Rights conferred to the patent holder Limitations of exclusive rights; Rights and Interests of the third parties and the Society Obligations of the patent holder Implementation of the principle of balancing rights in some regional and national patent protection system Conditions for granting patent rights Rights conferred to the patent holder Limitations of exclusive rights; Rights and Interests of the third parties and the Society Obligations of the patent holder 20 Chapter 2. Trend of imbalancing rights in the patent protection and its negative impact. 21 Introduction Patent protection for pharmaceutical and biotechnological inventions Patent protection for pharmaceutical inventions Patent protection for biotechnological inventions Extension of the rights conferred to the patent holder in respect of pharmaceuticals Extension of patent term Data exclusivity for pharmaceuticals Marketing exclusivity for orphan drugs Restriction on compulsory license Interpretations of the International Treaties in line to broaden rights conferred to the patent holder. 25

3 2.4.1 Principle of territoriality of patent and doctrine of national exhaustion of rights; restriction of parallel import Interpretation of term working of inventions Interpretation of the Article 31 of the TRIPS Agreement Abusing exclusive rights 26 Chapter 3. Possible measures for ensuring the balance of rights; Conclusions and Recommendations 28 Introduction Possible measures for ensuring the balance of rights Common measures for ensuring the balance of rights Implementation of requirement of disclosure of the patented inventions Providing scope and limitations to the rights of the patent holder Preventing abuses of patent protection system and patent exclusive rights. 29 a) Applying parallel import.. 29 b) Preventing abuses of the patent holder in the licensing practices 29 c) Applying compulsory license 29 d) Revocations of the patent of measure against abuses Government use Other measures Applying local working requirement Applying Bolar provision- Canada s experience Remedies Applying exception of data exclusivity - Argentina s experience Protection of biological materials and traditional knowledge Difficulties and Obstacles against applying the possible measures for ensuring the principle of balancing rights Lack of uniform an clear interpretations of the provisions of the TRIPS Agreement and the Paris Convention Difficulties in applying compulsory license Pressure of the developed countries Conclusions and Recommendations.. 32

4 3.1 Conclusions Evaluations of the measures for ensuring the balance of rights Viewpoint of the researcher on the issue of balancing of rights Recommendations General measures for enhancing balance of rights Measures for ensuring balance of rights in Vietnam Table 1. Recommendation of measures for preventing the trend of imbalancing rights. 35 Table 2. Additional measures for ensuring principle of balancing rights in Vietnam.. 36 Annex 1. The selected provisions of the TRIPS Agreement and the Paris Convention relating to the issue of balancing rights. 37 Annex 2. The selected provisions relating to the issue of balancing rights in several regional and national patent laws.. 42

5 ACKNOWLEDGEMENT I would like to express: My deepest appreciation to the Government of Japan, especially to the Japan Patent Office (JPO) and the Asia Pacific Industrial Property Center of the Japan Institute of Invention and Innovation (APIC) for funding and organizing this research fellowship program. My special thanks to all officers of JPO, especially to Mr. Shinichiro Ota, Commissioner of JPO; Mr. Takashi Sakurai, Director of the International Affair Division; Mr. Yuji Okuma, Director of the Regional Policy Office, International Affair Division; Mr. Takaki Hiroo, Deputy Director of the International Affair Divisions; Ms. Yuka Tsukamoto, Ms. Ai Hamagishi, Ms. Yuriko Homma, officers of the International Affair Division for warm welcome and assistance in my research work. My gratitude to Mr. Shingo Tsuji, Director General of the APIC; Mr. N.Kitazawa, Mr. M. Sakai and all the member staffs from APIC for providing me a good working conditions and assistance for carrying out the research. My special appreciation to Mr. Pham Dinh Chuong, Director General of the National Office of Industrial Property of Vietnam (NOIP) for giving me an opportunity to join this program. My sincere thanks to my colleagues from NOIP for their support and advice. Ta Quang Minh Vietnam i

6 The issue of balancing rights in the patent protection Introduction (i) An overview of the patent protection under the TRIPS Agreement The TRIPS Agreement provided for global minimum standards for protecting and enforcing most all subject-matters of intellectual property rights. The Agreement contains 73 Articles covers basic principles, standards and use of patents, enforcement, dispute settlement and a range of other subjects. The standards for the patent protection under the TRIPS Agreement, that all WTO Member must provide for, are as follows: - Patentable subject matters Article 27: Patent shall be available for any inventions in all the technical fields, including biotechnological, pharmaceutical. Obtaining and enjoying the patent protection shall not be subject to any discrimination as to the place of invention, the field of technology and whether products are imported or locally produced; - Right conferred to the patent holder- Article 28: Patent protection shall confer on patent holder the exclusive rights to prevent third parties from the acts of using the patented inventions; - Condition on patent applicants Article 29: For obtaining patent rights, the applicants have to disclose the inventions; - Exceptions and limitations to rights of the patent holder- Article 30, 31: Under these Articles, limitations and exceptions to the exclusive rights and other use without authorizations of the patent holder may be provided. - Term of protection Article 33: The term of the patent protection is 20 years from the filling date. (ii) The concerns about the negative impact of the patent protection on the public and society interests The TRIPS Agreement is the first international convention that specifies the minimum standards for patents and the patent protection for pharmaceuticals. From the health sector s perspective, these minimum standards derived from those of developed countries and did not take the protection of the public health into account. Prior to the launching of the negotiation of the TRIPS Agreement, over 40 countries failed to provide the patent protection for pharmaceuticals. By the time of the conclusion the TRIPS Agreement, 20 WTO Members still had not provided the patent protection for pharmaceuticals. Many countries provided only process and not product patents, and duration of patent was much less than 20 years in many 1

7 countries 1. For most developing countries, these standards represent a considerable increase in the protection granted for pharmaceuticals. They fear therefore an increase in prices of medicines (by reducing or eliminating competitions from generic production of medicines), and a further reduction in their population s already limited access to medicines. Developing countries expressed their concerns on the impact of the patent protection for pharmaceuticals, as follows 2 : - High prices for new drugs in countries with no previous patent protection; - Generic competition delayed in countries with previous patent term less than 20 years; - Weakening of local pharmaceutical industry-concentration of drug production would increase the dependence of developing countries. Understanding that patent protection for pharmaceuticals will stimulate R&D of new medicines, but it should protect not only the rights and interests of the patent holder but also safeguard the public health. Developing countries have required the WTO TRIPS Council to have special discussions on the TRIPS Agreement and the public health in order to provide an opportunity for WTO Members to consider the means of addressing the negative impact of the TRIPS Agreement on the public health and access to medicines. In its proposal for the this Special Discussion, the Africa Group (Zimbabwe 2001) had succinctly described the areas for action, as follows: Our challenge is to address the question of affordable access to drugs in a manner that is fair and equitable to all stakeholders; a way that seeks to avoid the abuse of patent protection through recourse to anti-competitive practices; a way that seeks to provide legal clarity in the interpretation and application of the relevant TRIPS provisions which allow the adoption of certain measures to enable the protection of health; indeed, a way that seeks to realize the objectives and principles of the TRIPS Agreement, and to restore confidence in a rules-bases multilateral trading system. In addition, patent protection of biotechnological invention can adversely affect biodiversity, environments, and the rights of the community on the biological materials and traditional knowledge. (iii) Doha Declaration on the TRIPS Agreement and the public health The WTO ministerial meeting in Doha on November 2001 issued the Declaration on the TRIPS Agreement and Public health. The Declaration confirmed the principles that WHO has been publicly defending over the 4 years. The 1 Source: WHO Policy Perspectives on Medicines, No. 3 March 2001 World Health Organization, Geneva; WTO Agreements & Public health, A joint study by the WHO and the WTO Secretariat, p Source: Dr. German Velasquez, Essential Drugs and Medicines Policy WHO, October 2002: Globalization, TRIPS and access to medicines: from the Revised Drug Strategy 1997 to Doha

8 Declaration reaffirmed the rights of WTO Members to use, to the full, the provisions in the TRIPS Agreement which provide flexibility for the purpose of protecting the public health and in particular, promoting access to medicines for all. Regarding to the TRIPS Agreement and public health, the Declaration states that: - The TRIPS Agreement does not and should not prevent members from taking measures to protect the public health ; - Developing countries can take the actions necessary to protect the public health, such as issuing compulsory licenses, without the fear of challenge from other WTO members; - Each member can determine what constitute a national emergency or circumstances of extreme urgency; - Public health crises, including those relating to HIV/AIDS, TB, malaria and other epidemics, can constitute a national emergency; - Each member can determine its own regime for the exhaustion of intellectual property rights; year extension of the deadline for the least-developed countries to implement the pharmaceutical intellectual property provisions of the TRIPS Agreement. They will now have until January 1 st 2016, to do so, rather than 2006; - Products manufactured under a compulsory license may not be exported to countries with no domestic manufacturing capability. The TRIPS Council should find a solution before the end of The Declaration is a political statement confirming developing countries rights under the TRIPS Agreement, and does not change the TRIPS Agreement itself. Developing countries may take actions necessary to protect the public health. (iv) Objectives - scope of research work One of the basic principles of the patent protection system is to balance the rights granted to the patent holder against the rights and interests of third parties and the society. The patent protection system presents this principle by the granting the exclusive rights to the patent holder as well as taking into account the rights and interests of the third parties and the society by providing some measures, such as providing limitation of the exclusive rights granted, allowing use of invention without authorization of the patent holder The principle of balancing rights is represented in the TRIPS Agreement and the any regional and national patent protection systems. However, this principle have not been effectively implemented in practice. The rights and interests of third parties and the society are not sufficiently protected and patent protection system may create a negative impact on the society, especially on the public health The research work aims to examine the principle of balancing rights in the patent protection under the TRIPS Agreement and its implementation in patent 3

9 protection of some regions and countries; the possibility and trend of imbalancing rights and possible measures to be applied for ensuring the enforcement of the principle of balancing rights in the patent protection; and aims to give evaluations on the applied measures for ensuring the balance of rights and recommendations for enhancing the implementation of the principles of balancing rights. (v) Research methodology - In order to carry out the research, the following methodologies will be used: - Library survey and internet search on materials relating to the research topic; - Make an overview on the materials collected and find the necessary ones; - Study materials using the analyzing and comparison method; - Study visits to some organizations; - Discussions and exchange opinions and experiences with Japanese Experts and Trainees. (vi) Content of the Report The Report contains an introduction, 3 Chapter, 2 Table and 2 Annexes. Chapter 1 deals with the provisions of the TRIPS Agreement, the Paris Convention relating to the principle of balancing rights in the patent protection and current situation of implementing this provision in the patent protection system of some regions and countries; Chapter 2 tries to clarify the trend of imbalancing rights in the patent protection and its negative impacts; Chapter 3 provides possible measures for ensuring the balance of rights that have been applied in the patent protection and in the lawsuit practices; gives the evaluations of applied measures and make some policy recommendations for effectively implementing the principle of balancing rights to the patent protection system, in general, and those to the Vietnam patent protection system, in particular. 4

10 Chapter 1 Principle of balancing rights in the patent protection Introduction The TRIPS Agreement not only introduces the minimum standards but also identifies the objectives and principles for the protection and enforcement of intellectual property rights. Article 7 of the TRIPS Agreement Objectives states that the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology.. to a balance of rights and obligations. Article 8 of the TRIPS Agreement Principles provides that Member may adopt measures necessary to protect public health and promote public interest, and to prevent the abuse of intellectual property rights by right holder or to curb practices which unreasonably restrain trade or adversely affect the international transfer of technology. The above mentioned Articles of the TRIPS Agreement are very important because they essentially establishes a principle of balancing rights in intellectual property protection, under which the rights of intellectual property rights holders are balanced with the rights and interests of third parties and the society in general. This chapter presents an overview of all substantive provisions of the TRIPS Agreement which establish the principle of balancing rights in the patent protection, and implementation of this principle in some region and countries. 1.1 Principle of balancing rights in the patent protection under the TRIPS Agreement The principle of balancing rights in the patent protection under the TRIPS Agreement is presented in the provisions providing: (I) Conditions for granting patent; (ii) the rights conferred to the patent holder; (iii) Limitations of the exclusive rights; rights of third parties, the public and society; (iv) Obligation of the patent holder Conditions for granting patent rights Patent shall be granted for any inventions where: (i) they are new, involve inventive step and are capable of industrial application (Article 27 of the TRIPS Agreement); and (ii) they are disclosed in a manner sufficiently clear and complete in the patent application for the invention to be carried out by a person skilled in the art (Article 29 of the TRIPS Agreement). Providing information concerning the applicant s corresponding foreign applications and grants may also be required as conditions for granting patent. 5

11 1.1.2 Rights conferred to the patent holder (i) Article 28 of the TRIPS Agreement provides for the minimum rights that patent must confer on the patent holder. These rights are specified according to the subject matter of a patent: - Where the subject matter of a patent is a product, the patent holder has the exclusive rights to prevent third parties not having his/her consent from the acts of making, using, offering for sale, selling, or importing that product for these purposes; - Where the subject matter of a patent is a process, the patent holder has the exclusive rights to prevent third parties without his/her consent from the acts of making, using, offering for sale, selling, or importing at least the product obtained directly by that process for these purposes. Patent holders also have the rights to assign, or transfer by succession, the patent and to conclude licensing contracts. (ii) Under Article 33 of the TRIPS Agreement, the term of protection must last for at least 20 years from the date of filling of the patent application Limitation of exclusive rights; rights of third parties and the society Under the TRIPS Agreement, the exclusive rights conferred by a patent are not absolute and can be subject to the following limitations or exceptions: (i) Article 30 of the TRIPS Agreement Exceptions to the rights conferred allows Members to make limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent holder, taking into account the legitimate interests of third parties; (ii) Article 31 of the TRIPS Agreement Other use without authorization of the right holder provided that Members may authorize the other use of patented invention without the authorization of the patent holder. That other use is the use by the government or the use of third parties by the government. (iii) Article 2 of the TRIPS Agreement requires Members to comply with Articles 1 through 12 and Article 19 of the Paris Convention: - Article 5(a)(2) of the Paris Convention provides that signatories have the rights to take legitimate measures providing for the grant of compulsory license to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work. In case of abuses which can not be prevented by a compulsory license, the signatories may revoke the patent (Article 5(a)(3)). - Article 5ter of the Paris Convention stipulates that signatories shall not be considered as infringement of the patent holder s right in respect of the act of using 6

12 invention in vessels, aircrafts, vehicles temporarily or accidentally enter the their territory. (iv) Under Article 40 of the TRIPS Agreement Control of anti-competitive practices in contractual licenses, Members have the right to take measures that are consistent with the TRIPS provisions, against anti-competitive practices Obligations of the patent holder Patent holder shall have the obligation to work the patented inventions and exercise the patent rights in a competitive way. A compulsory license shall be issued when the patent holder has not worked the patented invention and the patent may be invoked even after issuing the compulsory license in case of compulsory license is not sufficient to prevent the abuse of the patent holder (Article 31 of the TRIPS Agreement, Article 5(a)(3) of the Paris Convention). 1.2 Implementation of the principle of balancing rights in some regional and national patent protection systems The patent law of some region and countries adopted provisions for implementing the above mentioned provisions of the TRIPS Agreement, as follows: Conditions for granting patent rights All national patent laws provide conditions for granting patent consistent with the provisions of the TRIPS Agreement: criteria of patent protection; requirement on disclosure of inventions. The requirement on disclosure of inventions is presented in provisions relating to the requirements of the patent application (description, claims ). Relating to the invention on microorganisms, under European and some countries (European Countries, Canada,.) patent laws, patent applicants may fulfill the disclosure obligation by deposit of biological materials in the designated deposit authorities. In some countries (India, Indonesia, Thailand ), patent law requires that the patent applicant informs the country of origin of biological material, and demonstrates that he/she has complied with the relevant rules with regard to access to the material Rights conferred to the patent holder a) Rights conferred Almost national and regional patent laws provide the rights conferred by a patent consistent to the requirements of the TRIPS Agreement. Patent holders have the exclusive rights to use and prohibit the others from using the patented inventions as long as the patent is valid. The rights conferred by a patent may be transferred or 7

13 licensed. b) Patent term Patent term is 20 years counted from the date of filling patent application Limitation of exclusive rights; rights of third parties and the society All national patent laws have provisions on limitation of exclusive rights conferred by a patent. a) Exhaustion and parallel import The issue of exhaustion of intellectual property rights (IPRs) is not addressed in the TRIPS Agreement 3. The North American Free Trade Agreement (NAFTA) has no explicit provision on the exhaustion of IPRs. But the substantive provision of Chapter 17 of this Agreement on IPRs can be interpreted to the effect as giving members countries freedom on the question of rights exhaustion. So, there are a considerable number of different solutions to this issue that vary from country to country. In practice, it was found that there were three rules of exhaustion: national, regional and international exhaustion. Under national exhaustion, the right of the patent holder relating to the patented product is exhausted only with respect to the countries as soon as the product is put on the market of these countries. Under international exhaustion, the right of the patent holder relating to the patented product is exhausted by putting patented product on any market anywhere in the world. European Union desires so called regional exhaustion, under which the right of the patent holder relating to the patented product is exhausted with respect to the all countries members of the Union as soon as the product is put on the market of any country of the Union. Parallel import is the import and resale, without the consent of the patent holder, of a patented product which was put in the exporting country by the patent holder or with his/her consent. Depending on which rule of exhaustion applied, the parallel import may be allowed or prohibited: - The United State, Belgium, Brazil, New Zealand apply the rule of national exhaustion for patent rights and prohibit parallel import; 3 See Article 6 of the TRIPS Agreement 8

14 - Argentina, Australia, Canada, South Africa, Thailand, Vietnam apply the rule of international exhaustion and allow parallel import; - European Union (Article 28 of the Community Patent Convention) applies the rule of regional exhaustion 4 that denies parallel import from outside the EU territories, but does not restrict parallel trading within those territories. - The Supreme Court of Japan upheld the Tokyo High Court decision concerning parallel imports of patented goods ( BBS Case ), which stated that parallel imports of goods manufactured under the foreign patent do not infringe a corresponding Japanese patent. In that case the Supreme Court applied international exhaustion doctrine. - In other countries, the issue of exhaustion is not clearly identified in both patent and case law: China, India, Indonesia, Hong Kong, Russia. b) Exception to the rights conferred All the regional and national patent laws contain exceptions to the exclusive rights granted by a patent. The content and scope of those exceptions vary from country to country. Some types of the exceptions are applied as follows: (i) Experimental use Under experimental use exception, the patented invention may be used for experimental purposes without patent holder consent. Article 27(b) of the European Patent Convention exempts from patent infringement liability acts which are done for experimental purposes relating to the subject matter of the patented invention. The experimental use exemption is adopted in most national patent laws, e.g. Belgium (Article 28(1)(b) Patent Law); Denmark (Article 33); Finland (Article 3.3(3)); France (Article 30); Germany (Article 11(2)); Netherlands (Article 30(3) ); Italy (Article 1); Spain (Article 52(b)); the United Kingdom (Article 60(5)(b) ); Japan (Article 69(1)); Thailand (Article 36(1)); Central America (Article 22 of the Mexican Law) 5. The experimental use exemption also referred to in common law in Australia, Canada, Ireland, New Zealand, South Africa and the U.S.A 6. (ii) Early working/bolar exception National patent law of some countries provides so called Bolar exception which is specially applicable to pharmaceutical patents. This exception relates to the using an invention without the patent holder s authorization for the purpose of 4 This system has emerged from jurisprudence by the European Court of Justice (EJC), which in the early 1970s ruled that national exhaustion would be inconsistent with the Treaty of Rome which aims at uniting national markets into a single market. 5 Source: David Gilat: Experimental use and Patent, IIC Studies Volume 16, page 1 6 Source: David Gilat: Experimental use and Patent, IIC Studies Volume 16, page 1 9

15 obtaining approval of a generic product before the patent expiration date. The Bolar/early working exception was fist introduced in the United States by the US Drugs Price Competition and Patent Term Restoration Act (1984). This exception is also applied in Canada, Australia, Argentina, Thailand, Malaysia, Japan, Russia. In many European countries the Bolar exception is recognized by the case law based on the experimental use exception 7. In addition to the provision of the patent law which provides possibility of using patented invention for the purpose of obtaining the approval as mentioned above, the Manufacturing and Storage of Patented Regulations of Canada allowed stockpiling of patented products intended for sale after the date on which the term of patent expires. (iii) Individual prescriptions Patent laws of many countries exclude from the effect of the patent rights act of preparing medicines for individual cases in a pharmacy or by a medical professional: Brazil, Russia, UK, Thailand (iv) Other exceptions According to the Article 5ter of the Paris Convention, most national patent laws have provisions on exception to infringement of patent holder s rights in case of: (i) using devices protected by patent on board a foreign vessels, aircraft and vehicle which come into the country temporarily or accidentally, provided that such devices are used exclusively for the need of the vessels; and (ii) using devices protected by a patent in the construction or operation of the foreign vessels, aircraft and vehicle, which temporarily or accidentally enter the country. If immediately before the priority date of the patent application, a person was using or had taken definite steps to use the invention, the person is entitled to continue to use the patented invention without infringing patent holder s rights. c) Compulsory licensing Compulsory licensing enables a government to license to a third party (a company, government agency or other party) the right to use a patent without the patent holder s consent. Most countries, including developed countries provide for compulsory license in their patent law or in the antitrust law 8 : (i) Australia Under Article 133 of the Patent Act 1990, a compulsory license shall be 7 Source: 8 See Annex 2 10

16 granted in according with the conditions and limitations as follows: - Conditions for claiming and granting a compulsory license: (I) the reasonable requirement of the public 9 with respect to the invention have not been satisfied; and (ii) the patent holder has given no satisfactory reason for failing to exploit the patented invention. Compulsory licenses shall also be available when the patented inventions cannot be worked by the patent holder without his/her infringing another patent. - Limitation on compulsory license: Compulsory license shall be nonexclusive and shall be assignable only with a goodwill or an enterprise in connection with which the license is used. - License royalty: the royalty shall be agreed between patent holder and licensee or shall be determined by a prescribed court. - Revocation of the granted compulsory license: The granted compulsory license may be revoked by the patent holder (if he/she and the licensee are agreed) or by the court (on application made by either party) when the circumstances that justified the grant of the license have ceased to exist and are unlikely to recur and the legitimate interests of the licensee are not likely to be adversely affected by the revocation. Article 163 of the Patent Act provides that the Commonwealth or a State may exploit or authorize other parties to exploit the patented invention for the services of the Commonwealth or the State without authorization of the patent holder. (ii) Brazil The compulsory license may be granted in order to avoid abuses that can be caused by the exercise of rights conferred by the patent, such as in cases of: - insufficiency of exploitation (Article 68 (1) ); - abusive exercise (Article 68 (2)); - abuse of economic power (Article 68 (3)); 9 Article 135 of the Patent Act provides that the reasonable requirement of the public are to be taken not to have been satisfied if: (a) an existing trade or industry in Australia or the establishment of a new trade or industry is unfairly prejudiced, or the demand in Australia for the patented product, or a product resulting from the patented process, is not reasonable met, because of the patent holder s failure: (i) to manufacture the patented product to an adequate extent, and supply it on reasonable terms; or (ii) to manufacture, to an adequate extent, a part of the patented product that is necessary for the efficient working of the product, and supply the part on the reasonable terms, or (iii) to carry on the patented process to reasonable extent; or (iv) to grant licenses on reasonable terms; or b) a trade or industry in Australia is unfairly prejudiced by the conditions attached by the patent holder to the purchase, hire or use of the patented product, the use or working of the patented process; or c) the patented invention is not being worked in Australia on a commercial scale, but it capable of being worked in Australia. 11

17 - dependency of patents (Article 70 - that patent whose exploitation depends on the obligatory use of the object of a previous patent); - public interest or national emergency (Article 71). Compulsory licensing can only be requested after 3 years of the concession of the patent have elapsed. (iii) Canada The Commissioner may, on application by the Government of Canada or the government of a province, authorize the use of a patented invention by that government (section 19) when the applicant establishes that: - it has made efforts to obtain from the patentee on reasonable commercial terms and conditions the authorization to use the patented invention, except in the case of national emergency or extreme urgency or where the use for which the authorization is sought is a public non-commercial use; and - its efforts have not been successful within a reasonable period. The Commissioner considers expedient but shall settle those terms in accordance with the following principles: - the scope and duration of the use shall be limited to the purpose for which the use is authorized; - the use authorized shall be non-exclusive; and - any use shall be authorized predominantly to supply the domestic market. The authorized user shall pay to the patentee such an amount as the Commissioner considers to be adequate remuneration in the circumstances, taking into account the economic value of the authorization; The Commissioner may, on application by the patentee and after giving all concerned parties an opportunity to be heard, terminate the authorization if the Commissioner is satisfied that the circumstances that led to the granting of the authorization have ceased to exist and are unlikely to recur, subject to such conditions as the Commissioner deems appropriate to protect the legitimate interests of the authorized user. An authorization granted under this section is not transferable. (iv) China The Patent Office may, upon the application of the entity, grant a compulsory license to exploit the patent for the invention or utility model if: - any entity which is qualified to exploit the invention or utility model has made a request for authorization from the patentee of an invention or a utility model to 12

18 exploit its or his patent on reasonable terms and has been unable to obtain such authorization within a reasonable period of time (Article 51); or - a national emergency or an extraordinary state of affairs occurs, or the public interest so requires (Article 52); or - a patented invention or utility model is technically more advanced than another invention or utility model that was patented earlier and the exploitation of the later invention or utility model is dependent on the exploitation of the earlier invention or utility model (Article 53). A compulsory license shall not be exclusive and transferable (Article 56). A licensee shall pay the patent holder a reasonable exploitation fee. The amount of the fee shall be decided by both parties through consultation. Where the parties fail to reach an agreement, the Patent Office shall make a ruling (Article 57). (v) Malaysia Compulsory License shall be available on the grounds that, without just reason, the patented product or process: - is not being exploited at all; or - is being exploited at exorbitant prices; - or that exploitation does not meet market demands. If a later patent cannot be worked in Malaysia without infringing an earlier patent, and the later patent represents an important technical advance in relation to the earlier patent, a compulsory license may be granted to the owner or licensee of the later patent to the extent necessary to avoid infringement of the earlier patent. A reciprocal compulsory license to work the later patent may be granted to the owner or licensee of the earlier patent. Anyone may apply for a compulsory license after three years have elapsed from grant of the patent; Compensation to the patentee is determined by the Patents Board. (vi) New Zealand A compulsory license (Article 46 of the Patent Act) : At any time after the expiration of 3 years from the date of the sealing of a patent or 4 years from the date of the patent, whichever is the later, any person interested may apply to the Court for the grant of a license if a market for the patented invention is not being supplied, or is not being supplied on reasonable terms, in New Zealand. The Court may make an order for the grant of a license in accordance with the application upon such terms as the Court thinks fit. 13

19 A license is not exclusive; must not be assigned otherwise than in connection with the goodwill of the business in which the patented invention is used; and is limited to the supply of the patented invention predominantly in New Zealand. The licensee shall pay such remuneration to the patentee as may be agreed, or as may be determined by a method agreed, between that the licensee and the paten holder or, in default of agreement, as is determined by the Court. No license shall be granted unless the person applying for the license, having taken all reasonable steps to do so, has been unable to obtain a license, or to obtain a license on reasonable terms, from the patentee. (vii) Japan The Commissioner of the Patent Office, on the request of a person who intends to work the invention, may make a decision on grant of non-exclusive license in case of non-working invention, e.g. the patented invention has not been sufficiently and continuously worked during a period of three years or more in Japan (Article 83). The Minister of Economy, Trade and Industry, on the request of a person who intends to work the invention, may make a decision on grant of non-exclusive license in public interest (Article 93). A non-exclusive license may be transferred only together with the business in which it is worked. (viii) South Africa The commissioner may grant compulsory licenses in respect of dependent patents (Article 55) and in case of abuse of patent rights (Article 56) The rights in a patent shall be deemed to be abused if: - the patented invention is not being worked in the Republic on a commercial scale or to an adequate extent, after the expiry of a period of four years subsequent to the date of the application for the patent or three years subsequent to the date on which that patent was sealed, whichever period last expires, and there is in the opinion of the commissioner no satisfactory reason for such non-working; - the working of the invention in the Republic on a commercial scale or to an adequate extent is being prevented or hindered by the importation of the patented article; - the demand for the patented article in the Republic is not being met to an adequate extent and on reasonable terms; - by reason of the refusal of the patentee to grant a license or licenses upon reasonable terms, the trade or industry or agriculture of the Republic or the trade of any person or class of persons trading in the Republic, or the establishment of any new trade or industry in the Republic, is being prejudiced, and it is in the 14

20 public interest that a license or licenses should be granted; or - the demand in the Republic for the patented article is being met by importation and the price charged by the patentee, his licensee or agent for the patented article is excessive in relation to the price charged therefore in countries where the patented article is manufactured by or under license from the patentee or his predecessor or successor in title. (ix) U.S Compulsory licenses are not provided in patent law, but in antitrust law 10 : US Clean Air Act (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) 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: - Authorization of each compulsory license of a patent must be considered on the individual merits; - Any proposed compulsory licensee already must have made efforts to obtain authorization from the patent holder; - The scope and duration of an authorized compulsory patent license must be limited; - An authorized compulsory patent license must be non-exclusive; - An authorized compulsory patent license must be non-assignable; - An authorized compulsory patent license must be predominantly for supply of the domestic market; - The authorization of the compulsory patent license must be terminable when the circumstances that led to the authorization cease to exist; - Patent holders must be paid adequate compensation; - Authorization decisions must be subject to judicial or other independent review; - Compensation rates must be subject to judicial or other independent review; 10 See Annex 2 15

21 d) Revocation of patent Patent law of almost countries has provision on revoking granted patent. General grounds for doing it are the invention does not meet the protection requirements, the patent holder does not have the right to file a patent application... Some countries also provide for revoking patent if the patent holder has not fulfilled the obligations specified in the patent law, such as: (i) to sufficiently disclose the invention (USA 11 ; Russia; New Zealand; EU; Malaysia; Hong Kong ), (ii) to sufficiently work the invention even when a compulsory license had been granted (Australia; Brazil; Malaysia; Thailand ) 12. e) Government use of patent The patent laws of some countries provide that the Government has the right to use the patented invention: (i) Australia The Patent Act 1990, amended in 1994 provided exploitation of inventions by Crown (Article 163): The exploitation by the Crown of a patent and by a person authorized by the Commonwealth or a State is not an infringement of a patent. (ii) New Zealand Use of Patented Inventions for Services of the Crown (Article 55): Any Government Department and any person authorized in writing by a Government Department, may make, use, exercise, and vend any patented invention for the services of the Crown and anything done by virtue of this subsection shall not amount to an infringement of the patent concerned. (iii) Malaysia The Malaysian patent law has a special provision for "Rights of Government," which authorizes "the Government of the Federation or of any State, a Ministry or Government department or any person authorized by such Government, Ministry or Government department" to "make use and exercise any invention," subject to the payment of "reasonable compensation." (iv) Singapore In Singapore, the patent law has a provision for "Use of Patented Inventions for Services of Government," which permits "a Government department or a person authorized by a Government department" to "make, use, exercise and vend the patented invention for any purpose which appears to the Government department necessary or expedient" for several stated purposes, including "public non- 11 See: David Rainey: Duty of Disclosure in Australia, Patent and Licensing, June 2002, p See Annex 2 16

22 commercial use." (v) Philippines In the Philippines, the relevant provision is "Use of Invention by Government," which says, a "Government agency or third person authorized by the Government may exploit the invention even without agreement of the patent owner where: - The public interest, in particular, national security, nutrition, health or the development of other sectors, as determined by the appropriate agency of the government, so requires; or - A judicial or administrative body has determined that the manner of exploitation, by the owner of the patent or his licensee, is anti-competitive. " (vi) U.S. The US has very broad rights to use patents for public purposes. The government can use patents for any government purpose, is not obligated to negotiate for licenses, and does not authorize any injunctive relief to the patent owner. The patent owner is granted compensation, as a government taking under eminent domain laws (28 USC Sec 1498). f) Anti-competitive provisions Patent holder has the right to authorize third parties to use the patented inventions under certain conditions set down in the licensing agreement. The patent related law of some regions and countries have so-called anti-competitive provisions in licensing agreements, as follows: (i) Australia Article 144 of the Patent Act provides that a condition in a contract relating to the sale or lease of, or a license to exploit, a patented invention is void if the effect of the condition would be: - to prohibit or restrict the buyer, lessee or licensee from using a product or process (whether patented or not) supplied or owned by a person other than the seller, lessor or licensor, or a nominee of the seller, lessor or licensor; or - to require the buyer, lessee or licensee to acquire a product not protected by the patent from the seller, lessor or licensor, or a nominee of the seller, lessor or licensor. (ii) EC Article 85 of the EC Treaty regulates agreement among undertakings. Under this Article, all agreements between undertakings and concerted practices, which may affect trade between Member States and have as their object or effect the prevention, restriction or distortion of competition within the common market, shall be prohibited as incompatible and shall be automatically void, in particular those which: - directly or indirectly fix purchase or selling prices or other trading conditions; 17

23 - limit or control product, markets, technical development, or investment; - share markets or sources of supply; - apply dissimilar conditions to equivalent transactions with other trading partner, thereby placing them at a competitive disadvantage; - make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their very nature or according to commercial usage, have no connection with the subject of the contracts. Article 3 of the Commission Regulation No 2349/84 of 23 July 1984 on the application of Article 85 (3) of the EC Treaty to certain categories of patent licensing agreements provides that the following agreement shall be prohibited according to the Article 85 of the EC Treaty : -The licensee is prohibited from challenging the validity of licensed patents or other industrial or commercial property rights within the common market belonging to the licensor or undertakings connected with him; -The duration of the licensing agreement is automatically prolonged beyond the expiry of the licensed patents existing at the time the agreement was entered into by the inclusion in it of any new patent obtained by the licensor, unless the agreement provides each party with the right to terminate the agreement at least annually after the expiry of the licensed patents existing at the time the agreement was entered into; - One party is restricted from competing with the other party, with undertakings connected with the other party or with other undertakings within the common market in respect of research and development, manufacture, use or sales; - The licensee is charged royalties on products which are not entirely or partially patented or manufactured by means of a patented process, or for the use of know-how which has entered into the public domain otherwise than by the fault of the licensee or an undertaking connected with him; -The quantity of licensed products one party may manufacture or sell or the number of operations exploiting the licensed invention he may carry out are subject to limitations; - One party is restricted in the determination of prices, components of prices or discounts for the licensed products; - One party is restricted as to the customers he may serve, in particular by being prohibited from supplying certain classes of user, employing certain forms of distribution or, with the aim of sharing customers, using certain types of packaging for the products; - The licensee is obliged to assign wholly or in part to the licensor rights in or to patents for improvements or for new applications of the licensed patents; - The licensee is induced at the time the agreement is entered into to accept further licenses which he does not want or to agree to use patents, goods or services which he does not want, unless such patents, products or services are necessary for a technically satisfactory exploitation of the licensed invention; 18

24 - The licensee is required not to put the licensed product on the market in territories licensed to other licensees within the common market or does not do so as a result of a concerted practice between the parties; - One or both of the parties are required: to refuse without any objectively justified reason to meet demand from users or resellers in their respective territories who would market products in other territories within the common market; to make it difficult for users or resellers to obtain the products from other resellers within the common market, and in particular to exercise industrial or commercial property rights or take measures so as to prevent users or resellers from obtaining outside, or from putting on the market in, the licensed territory products which have been lawfully put on the market within the common market by the patentee or with his consent; or do so as a result of a concerted practice between them. (iii) US The U.S. Department issued the Antitrust Guidelines for the Licensing of Intellectual property on April 6, These Guidelines state the antitrust enforcement policy of the U.S. Department of Justice and the Federal Trade Commission ( the Agencies ) by providing: (i) general principles; (ii) standard antitrust analysis applies to intellectual property; (iii) antitrust concerns and modes of analysis; (iv) general principles concerning the Agencies evaluation of licensing arrangements; and (v) application of general principles. According to these Guidelines, a licensing arrangement may be recognized as anti-competitive in case of: - Horizontal restraints: the existent of a restraint in a licensing arrangement among the parties in a horizontal relationship including price fixing, allocation of markets or customers, agreement to reduce output - Resale price maintenance: a licensing arrangement includes the provision to fix a licensee s resale price of products. - Tying arrangements: a arrangement by a party to sell one product on condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that tied product from another supplier. - Exclusive dealing: a licensing arrangement includes provisions to prevent the licensee from licensing, selling, distributing, or using competing technologies. - Cross-licensing and pooling arrangements: Cross-licensing and pooling arrangements are agreements of two or more owners of different items of intellectual property to license one another or third parties. These arrangements may have anticompetitive effect in certain circumstances, for instance, when they include the collective setting price or coordinated output restrictions provisions. - Grantbacks: a grantback is an arrangement under which a licensee agrees to extend to the licensor of intellectual property rights to use the licensee s improvements to the licensed technology. The grantback may adversely affect competition if it reduces the licensee s incentives to engage in research and development. - Enforcement of invalid intellectual property rights: enforcement or attempted enforcement of a patent obtained by fraud on the Patent and Trademark 19