BRIEFING

EU Legislation in Progress

Compulsory licensing of patents for

crisis management
OVERVIEW
The COVID-19 pandemic highlighted the need for a resilient healthcare system but also for quick
access to inventions and technologies in challenging situations. To address this need, in April 2023
the Commission submitted a proposal for a regulation on compulsory licensing for crisis
management. The aim is to secure the rapid deployment of patent-protected inventions in times of
crisis or emergency, without eroding patent protection as an incentive to innovate. The proposal
lays down rules and procedures for granting Union compulsory licences and supervising the law's
implementation.
Views on the proposal diverge. Civil society organisations support a broad application of the
compulsory licensing scheme, whereas industry organisations advocate narrow application.
Opinions differ on 1) the need for legislative intervention; 2) the events authorising the use of
compulsory licences; 3) whether compulsory licensing should be conditional on failed prior
negotiations for voluntary licences; 4) whether the disclosure of know-how or trade secrets is
warranted under certain circumstances; 5) at what level remuneration and sanctions should be
capped; 6) how advisory bodies should be composed; 7) what role potential licensees should play
in initiating and engaging in the compulsory licensing procedure.
On 13 March 2024, Parliament voted its first-reading position ahead of future trilogue negotiations.
Parliament insists on empowering the Commission to mandate the disclosure of relevant trade
secrets and know-how, and on significantly strengthening the position of rights-holders. The
Council is still preparing its position.

Proposal for a regulation of the European Parliament and of the Council on compulsory
licensing for crisis management and amending Regulation (EC) 816/2006

Committee responsible: Civil Liberties, Justice and Home Affairs (LIBE) COM(2023) 224 final
Rapporteur: Adrián Vázquez Lázara (Renew, Spain) 27.4.2023
Shadow rapporteurs: Geoffroy Didier (EPP, France) 2023/0129(COD)
Tiemo Wölken (S&D, Germany) Ordinary legislative
Heidi Hautala (Greens/EFA, Finland) procedure (COD)
Emmanuel Maurel (The Left, France) (Parliament and Council
on equal footing –
Next steps expected: Trilogue negotiations formerly 'co-decision')

EPRS | European Parliamentary Research Service

Author: Hendrik Mildebrath with Hugo Carmona Bas
Members' Research Service
PE 757.634 – April 2024 EN
EPRS | European Parliamentary Research Service

Introduction
To secure the fast deployment of critical intellectual property in a time of need, the Commission is
proposing to introduce a regulation on Union compulsory licensing of patents for crisis
management (CLCM-COM).1 A compulsory licence is 'the possibility for a government to allow a
third party to use a patent without the authorisation of the rights-holder, subject to certain
conditions'. 2 While the proposed regulation would apply across domains, the granting of a
compulsory licence would be conditional on the activation or declaration of a crisis or emergency
mode under selected EU crisis instruments, such as the Single Market Emergency Instrument, the
Regulation on serious cross-border threats to health and the Chips Act. Compulsory licences would
only grant the exploitation of protected inventions linked to products or processes that are
indispensable for responding to a crisis or emergency in the EU.

Context
The landscape of patent regulation
In Europe, various routes lead to patent protection. National patents are only valid in the country
in which they are granted. These may be obtained through an application to the national patent
offices or through the European Patent Office. Applicants may also use the Patent Cooperation
Treaty (PCT) procedure, whereby instead of filing many individual national applications, they would
file a single 'international' one to a PCT Receiving Office or the International Bureau of the World
Intellectual Property Organization (WIPO). This not only simplifies procedures for them but also
allows them to seek protection in a large number of countries. This procedure does not result in an
'international' or 'world' patent but rather in a series of national patents.
Similarly, legal persons may use the European Patent Convention (EPC) procedure, by filing a single
application for a European patent with the European Patent Office (EPO) or a national patent office
of one of the state parties of the EPC (including all EU Member States). Unlike under the PCT
procedure, a 'successful application will result in a single grant of a bundle of national patents in
each of the countries designated by the applicant'. A European patent must be validated at the
national patent offices of the countries designated by the applicant for it to be effective. Once the
patent is converted into a bundle of patents, their fate depends on the (EPC framed) national laws.
Since the entry into force of the Unitary Patent System on 1 June 2023, entities may also apply to
the EPO for a unitary patent, i.e. a 'European patent with unitary patent effect'. A patent-seeking
entity must apply for a regular European patent and request the EPO to validate the patent for
unitary effect within 1 month of the entity's receiving the European patent. The unitary patent has
unitary character, meaning it will provide uniform protection and have equal effect in all
participating Member States (once ratified). It may only be limited, transferred or revoked, or lapse,
in respect of all the participating Member States. The unitary patent system serves as a one-stop-
shop for patent protection and enforcement. It can be combined with the classic European patent.

The landscape of compulsory licensing mechanisms

Over time, to prevent the abuse of dominance and protect the public interest, lawmakers have
imposed limits on patents through competition law and other laws containing, for instance,
compulsory licensing provisions. Compulsory licensing is frequently perceived as a 'last resort
mechanism' that should only apply where voluntary agreements fail or are unavailable. In its impact
assessment to the proposed regulation, the Commission highlights that the threat of a compulsory
licence incentivises the rights-holder to find a voluntary agreement ('incentive role') and that the
compulsory licensing scheme enables public authorities to grant manufacturers that can produce
crisis-relevant products a compulsory licence ('enabling role').

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The multilateral Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS

Agreement) provides the international legal framework for compulsory licensing. Specifically, it
allows compulsory licensing for the purposes of i) supplying the domestic market with any type of
product (Article 31); and ii) exporting pharmaceutical products to least developed WTO members
and other members that notify the TRIPS Council of their intention to use this form of licensing
(Article 31bis). Article 31bis was introduced to enable a member to produce patent-protected
pharmaceutical products domestically and export them to a member without its own
manufacturing capacities. The TRIPS Agreement does not list the grounds on which a compulsory
licence can be granted but mandates several conditions in this regard. While the TRIPS Agreement
frames intellectual property (IP) systems, compulsory licensing has not been harmonised at EU level
and EU Member States grant compulsory licences based on different grounds and procedures.3
EU lawmakers implemented Article 31bis of the TRIPS Agreement through
Regulation (EC) No 816/2006. The regulation obliges Member States to grant a compulsory licence
pursuant to a harmonised procedure 'when such products are intended for export to eligible
importing countries in need of such products in order to address public health problems'. This
regulation was never used or evaluated. Additionally, two other EU intellectual property legislative
acts stipulate a compulsory licensing scheme. Article 29 of Council Regulation (EC) No 2100/94
enables the Community Plant Variety Office to grant a compulsory licence on a community plant
variety right. Article 12 of the Biotechnology Directive enables a plant breeder to apply for a
compulsory licence where they cannot use a plant variety without infringing a patent.
The proposed EU regulation on compulsory licensing would not affect the latter two pieces of
legislation. However, it would amend Articles 18a and 18b of Regulation (EC) No 816/2006 by laying
down rules on granting a Union compulsory licence for the purposes of exporting medical products
to third countries with public health problems (Article 23 and Recital 37). 4 This Union compulsory
licence would provide a Union-level solution to avoid rights-holders having to apply for various
compulsory licences under national schemes in cases where manufacturing and sales are spread
across different Member States.

Existing situation and rationale for envisaged intervention

According to the Commission, the available national compulsory licensing schemes are not fit to
address cross-border crises in a timely manner because they have territorial limitations and licensing
conditions diverge '[making] a coordinated and timely implementation practically impossible'. For
instance, if a crisis-related product is needed in several Member States but a manufacturer only has
production capacity in other Member States, then the manufacturer may need multiple compulsory
licences covering all territories and all IP relevant steps (production, export, import, sales, etc.).5 The
material scope of such licences as well as the licensing procedures and conditions would vary across
Member States, resulting in lengthy and burdensome processes. The problem is further exacerbated
where crisis-related products draw on multiple patents and where value chains of manufacturing
capacities spread across borders. Additionally, the available compulsory licensing schemes are
disconnected from existing and envisaged EU crisis instruments, suggesting there is room to
improve EU resilience in times of crisis.
In light of the above, the proposal seeks to ensure that critical products and components swiftly
reach those in need during crises. With a view to creating a 'convergent, predictable and workable
compulsory licensing system ... for crisis management', it identifies three specific objectives
(including for export):
 reducing fragmentation of compulsory licensing rules and improving coherence,
 ensuring that the territorial reach of the compulsory licensing framework allows for
adequate response in crisis and emergency situations,
 supporting EU resilience 'by improving the coordination, streamlining the decision
making and allowing compulsory licences to better complement EU action in crises'.

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In its impact assessment, the Commission developed four policy options and opted for the one that
most effectively and efficiently achieves these objectives. It is worth noting that the proposal
diverges from the preferred option in that several Member States cannot request the activation of
this mechanism.

Parliament and Council starting positions

In its resolution of November 2021, the Parliament stated that it supports the Commission in
pursuing the aims of its 2020 IP action plan and called on the Commission 'to analyse and explore
possible options for ensuring effectiveness and better coordination of compulsory licensing in the
EU'. Already in its June 2021 resolution on meeting the COVID-19 challenge, Parliament had called
'on the Commission to provide objective criteria regarding if, when and in which cases it will resort
to compulsory licensing'. In its conclusions of 18 June 2021, the Council welcomed the
Commission's IP action plan and the initiatives announced therein on better IP protection. It also
mentioned that the EU was ready to discuss other tools, including the flexibilities provided for in
Articles 31 and 31bis of the TRIPS Agreement.

Preparation of the proposal

Back in 2020, the Commission underlined in its IP action plan 'the need to ensure that effective
systems for issuing compulsory licences are in place'. After exploring the creation of an emergency
coordination mechanism for compulsory licensing, the Commission incorporated the task of
establishing clear rules for the compulsory licensing of patents in its 2023 work programme. The
Commission sought feedback by way of a call for evidence and a public consultation. The proposal
was tabled as part of the 2023 'patent package' consisting of six legislative initiatives. The Regulatory
Scrutiny Board (RSB) initially gave a positive opinion with reservations as regards the impact
assessment for the compulsory licensing proposal. In turn, the Commission revised the text to
address the RSB's comments as described in Table 11 of Annex 1 to the final impact assessment. The
European Parliamentary Research Service analysed the strengths and weaknesses of the final impact
assessment.

The changes the proposal would bring

Compulsory licensing powers and procedures
Requirements and legal effect of Union compulsory licences
The proposal would enable the Commission to grant licences for patents. It should apply equally to
national patents, European patents and unitary patents (Recital 9). Additionally, it would cover
two patent-related intellectual property rights, namely utility models 6 and supplementary
protection certificates 7 (Articles 2(1) and 5(3)). These may well protect innovations that may prove
necessary to combat crises and would therefore be included in the scope (Recitals 10 and 11).
The proposal would enable the Commission to grant a Union compulsory licence where a crisis
mode or an emergency mode listed in the annex has been activated or declared (Article 4). The
Commission lays out the definition of crisis and the conditions for triggering and de-triggering crisis
instruments in Tables 23 and 24 of Annex 6 to the impact assessment accompanying the CLCM-COM
and Annex 9 of the impact assessment accompanying the proposal for a Single Market Emergency
Instrument (SMEI). The scope and duration of the licence would be limited to the scope and
duration of the relevant crisis or emergency mode, ensuring that the licence remains relevant and
appropriate for the specific situation it is intended to address (Article 5(1)(b) and Recital 16). It is not
entirely clear whether 'scope' under Article 5(1)(b) refers to the material scope, parts of the material
scope as defined by Article 2(1), the territorial scope, or the overall scope of the compulsory licence.

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In a similar vein, the use of the invention for which a compulsory licence has been granted should
only be authorised to a qualified person able to make, use, market, sell or import the crisis-relevant
product, in accordance with licensee obligations provided for in Article 10 (Articles 5(1)(c) and (d)
and 10(1)(a) and (b)). Crisis-relevant products cover 'products or processes that are indispensable
for responding to a crisis or emergency or for addressing the impacts of a crisis or emergency in the
Union', a definition inspired by but more general than the one expected under the Single Market
Emergency Instrument (SMEI) (Article 3(a) and Recital 15). Under Article 10, the licensee must limit
its activities to what is necessary for the supply of crisis-relevant products and comply with
transparency and information duties.
The Commission could only grant a licence against adequate remuneration (Article 5(1)(d) and
Recital 16, sixth sentence) intended to compensate the rights-holder for the use of their IP. Besides
being 'adequate', the remuneration should 'not exceed 4 % of total gross revenue generated by the
licensee through the relevant activities under the Union compulsory licence' (Articles 5(d) and 9 and
Recital 27). The amount would be specified in the Union compulsory licence (Article 8(1)(e)).
The rights-holder and the licensee would have to 'act and cooperate with each other in good faith'
(Article 13(1)). In line with their good faith commitment, both entities would have to exert maximum
effort to achieve the objectives of the Union compulsory licence, while taking into account each
other's interests (Article 13(2)). The impact assessment suggests that good cooperation includes
access to know-how in some circumstances.
The export of products manufactured under a Union compulsory licence would be prohibited
(Article 11). This is an essential provision aimed at ensuring that the products produced under this
licence are solely dedicated to addressing a crisis within the EU and do not get diverted for
commercial gains outside EU territory (Recital 28). Customs authorities would help enforce this
prohibition by controlling the movement of such products (Article 12 and Recital 30).

Procedure for granting a Union compulsory licence

The Commission would be responsible for initiating the procedure of assessing the merits of a crisis
or emergency and launching deliberations on the need for granting a compulsory licence. When
determining whether to grant a Union compulsory licence, the Commission would have to consider
an opinion by an advisory body, the rights and interests of the rights-holder and licensee and the
existing national compulsory licences reported by the Member State (Article 7(3)). The initiation of
the compulsory licensing procedure should be publicised, not least to help the Commission identify
the IP rights concerned, the rights-holders concerned and the potential licensees (Article 7(5) and
Recital 23).
In order to take well-informed decisions, the Commission would have to consult a 'competent' or an
'ad hoc' advisory body (Article 6(2) and (5)). Where a relevant Union crisis instrument already
establishes an advisory body, the Commission would indicate that this 'competent' advisory body
also has the competence to assess the need for compulsory licensing at Union level (Recital 17). In
the absence of competent advisory bodies, the Commission would have to set up an 'ad hoc'
advisory body, composed of one representative of each Member State (Article 6(5) and (6) and
Recitals 18 and 19). The Commission would be able to invite representatives of the Parliament, as
well as representatives of economic operators, rights-holders, potential licensees, stakeholder
organisations, social partners and experts to attend meetings of the advisory body as observers
(Article 6(4)(b)) The relevant advisory body would provide the Commission with a non-binding
opinion (Article 7(1)-(2) and Recital 10).
Before the Commission grants a licence, it must give the rights-holders and licensees an opportunity
to express their views (Article 7(3) and Recitals 20 and 21). Where the Commission finds that the
requirements for a Union compulsory licence are satisfied, it would have to grant the licence with a
prescribed content (Article 8) by adopting an implementing act (Articles 7(7) and 24(2) or (4) and

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recital 38), while ensuring the protection of confidential information (Article 7(8)). The legality of the
implementing act would be subject to judicial review (Recital 31).
Figure 1 – Steps involved in granting a Union compulsory licence under the Commission
proposal on compulsory licensing for crisis management

Source: Annex 6 of the impact assessment, SWD(2023) 121 final, European Commission, 27 April 2023,
p. 133.

Supervisory powers and procedures

The Commission is required to review the Union compulsory licence upon a justified request from
the rights-holder or licensee or on its own initiative. It may:
 modify the specifications, for instance, where they become known after the licence has
been granted (Article 14(1) and recital 33);
 take complementary measures. For instance, the Commission may request further
information to ensure that the compulsory licence fulfils its objective effectively and
efficiently (Article 14(2) and recital 32). The impact assessment suggests that this should
extend to mandating access to know-how under certain circumstances;
 terminate the licence where the circumstances that led to it cease to exist and are unlikely
to recur or where the licensee fails to comply with the obligations laid down in the
proposal (Article 14(3) and (5) and recital 33).
Besides these interventions, the Commission may impose fines and periodic penalty payments
on the rights-holder and the licensee in order to enforce the obligations under the proposed
regulation (Articles 15 and 16). The penalties should be effective, proportionate and dissuasive
(recital 34). The parties concerned should be heard and have access to the file (Article 19). In
principle, exercising these powers would be subject to a limitation period of 5 years and the
resulting enforcement decision would be subject to a limitation period of (another) 5 years
(Articles 17 and 18). The Court of Justice of the EU would have unlimited jurisdiction in respect of
fines and penalty payments (Article 21 and recital 35).
Customs authorities would help enforce the prohibition of exporting products manufactured
under a Union compulsory licence (Article 12 and recital 30).

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Advisory committees
The European Committee of the Regions decided not to issue an opinion. The European
Economic and Social Committee (EESC) adopted an opinion on 20 September 2023 regarding the
patent package. The EESC considers that the proposed regulation would neither comply with the
European Convention on Human Rights (ECHR), nor with the TRIPS Agreement's minimum
standards. Moreover, the proposal would neither establish a fair and transparent procedural system
where the patent owner has full party status, nor provide for specific legal remedies. Consequently,
it recommends that the compulsory licensing of European patents and unitary patents should be
dealt with by technically competent courts such as the Unified Patent Court, and that compulsory
licensing of national patents and utility models should be performed by the Member States' national
competent authorities and courts, guided by an appropriate EU directive on compulsory licensing.

National parliaments
The deadline for the submission of reasoned opinions on the grounds of subsidiarity expired on
1 September 2023. The Portuguese Assembly of the Republic considers that the proposal complies
with the principle of subsidiarity and proportionality. Similarly, the Italian Chamber of Deputies
considers that, while the proposal is in general compliant with these principles, certain changes to
it should be made during the negotiations and that an in-depth analysis is needed. Despite the fact
that the impact assessment was revised to take into consideration the concerns raised by the
Regulatory Scrutiny Board, in its reasoned opinion the Italian Chamber of Deputies nevertheless
maintains these concerns. The Committee on EU Affairs of the National Assembly of Slovenia
expressed support for the proposal. Slovenia demanded 'a clear definition as to when a Union
compulsory licence may be granted and in which cases the rights-holders are entitled to
compensation'. The Committee on European Affairs of the Chamber of Deputies of the Parliament
of Czechia supports the proposed regulation, but emphasises that compulsory licensing should
only be available as a last resort.
Member States' parliaments have continued to express their views beyond the deadline for a
reasoned opinion. The Estonian Parliament supports the proposal but considers that it can be
improved by giving a precise definition for the conditions for compulsory licensing, the goods
covered and the procedure. Additionally, it considers the mandate of the Commission as being too
broad. The German Federal Parliament's lower house raises various concerns, and recommends,
amongst other things, including explicit substantive conditions for granting compulsory licences
and emphasising that compulsory licensing would only be possible where it is strictly necessary for
the supply of crisis-relevant products. Additionally, it points to the need for defining the terms 'crisis'
and 'emergency' and that judicial redress should be enhanced. The Committee on Economic and
Monetary Affairs of the Finnish Parliament agrees with its government's position, according to
which compulsory licensing should remain a last resort and certain key concepts of the proposal
should be clarified. According to the Swedish Government's preliminary position, which it
communicated to the Swedish Parliament, the proposal is essentially compatible with the
principles of subsidiarity and proportionality. However, it states that further analysis is required as
regards the compliance with the principle of proportionality, and that compulsory licensing should
remain an ultima ratio.

Stakeholder views 8
Views in favour of broad application
The European Consumer Organisation (BEUC) is in favour of compulsory licensing, because
'patients should have access to affordable and innovative medicines' and such a scheme would
'guarantee the supply and the free movement of crisis-critical patented products in the Single
Market'. The organisation advocates that the Commission should be able to waive prior voluntary

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licensing attempts in the case of a national emergency or extreme urgency and to grant licences
during 'major events' that may pose a serious threat to public health or affect the supply of or
demand for medicinal products. Compulsory licences should also cover complementary know-how.
Médecins du Monde point out that during the coronavirus pandemic, when a handful of private
companies reaped large profits to the detriment of the public interest, states should have used
compulsory licences to allow other producers to manufacture vaccines. They observe that patents
are proliferating across the world, yet this does not reflect an increase in innovation – 'instead, it
shows the weakening of standards for patent-granting'. Additionally, low patentability standards
would allow 'evergreening', the practice of multiplying patents on variations of the original
product. 9 Also in the COVID-19 context, they consider certain patents to be under-served and are
taking legal action at the European Patent Office (EPO).
Médecins Sans Frontières consider that compulsory licensing is an important legal mechanism to
promote access to medicines, but that key obstacles need to be removed to ensure the effective use
of compulsory licensing in the EU. They believe that interpreting compulsory licensing under the
TRIPS Agreement as a last-resort instrument is misleading, and argue in favour of using it whenever
a country deems it necessary, for instance to address emergencies or other situations of urgency, or
to apply it for public non-commercial purposes or for remedying anti-competitive behaviour. It
believes that 'relying on the willingness of multinational pharmaceutical companies [to grant
licences voluntarily] does not guarantee supply diversity and global equity in access'. Additionally,
data and market exclusivity should be waived automatically in cases of public health need and when
a compulsory licence is issued by a Member State.
Emma Hughes, speaking on behalf of patients with cystic fibrosis, considers that public authorities
should be able to grant compulsory licences for any public-interest ground, including securing
access to life-saving medicines. Specifically, she describes a situation where a pharmaceutical
company held a monopoly over a patent-protected drug and priced it prohibitively high
(US$326 000 per patient per year). Only after the UK government alluded to its moral obligation to
explore using compulsory licensing mechanisms, did the company drop its price and make the
treatment more affordable for the UK's National Health Service.

Views opposing broad application

BusinessEurope considers that current international, EU and national laws, as they are, do a good
enough job in regulating compulsory licensing of patents. Compulsory licences, they observe,
'should only be used in mainly knowledge-based economies as a last resort in very limited
circumstances'. According to them, EU intervention violates the principles of proportionality and
subsidiarity. Additionally, they advocate for 1) excluding trade secrets and know-how from the
scope of the envisaged law; 2) clearly defining key concepts including crisis, emergencies and crisis-
relevant products; 3) including industry players as full-fledged members of advisory bodies; and
4) leaving it to the rights-holder and licensee to negotiate adequate remuneration.
Similarly, the European Federation of Pharmaceutical Industries and Associations (EFPIA)
considers that there is no compelling evidence for justifying the introduction of a compulsory
licensing mechanism, and that there are considerable grounds for concern regarding the proposed
regulation's substantive provisions. According to EFPIA, the coronavirus pandemic evidenced that
there was no need for compulsory licensing and that the proposal would erode patent protection
and diminish incentives for innovation. Besides, the EFPIA raises issues over the compatibility of the
proposal with provisions under Article 31 of the TRIPS Agreement and various articles of the
EU Charter of Fundamental Rights. On a substantive level, it criticises 1) the lack of a clear definition
of 'crisis'; 2) the ambiguity as regards the notification of rights-holders; 3) the uncertainties regarding
the role of a licensee in initiating and engaging in the licensing process; 4) the lack of
encouragement to first negotiate voluntary licences; 5) the uncertainties regarding the decision-
making and the composition of advisory bodies; 6) the possibility of granting overly broad licences

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that apply to any rights attached to a product without having to identify them individually; 7) the
lack of safeguards to limit a possible detrimental impact of complementary measures on trade
secrets; 8) the uncertain avenues for redress and its scope of redress possibilities; and 9) the fact that
the maximum remuneration is too low, especially when compared to the maximum penalties.
The American Chamber of Commerce to the EU (AmCham EU) sees no evidence that would justify
the introduction of a Union compulsory licensing system, and is concerned that such a system could
hinder the EU's competitiveness in attracting investment in innovative sectors. Furthermore,
AmCham EU, like EFPIA, points to compliance issues of the proposed regulation with the TRIPS
Agreement. It advocates prioritising voluntary agreements and ensuring more judicial protection
across all stages of the compulsory licensing process (pre, during and post grant). Finally, it raises
concerns over ambiguous terms such as 'crisis' and 'complementary measures', the open-ended
composition and workings of the proposed advisory body, the trigger for a compulsory licensing
procedure, and the circumstances under which a rights-holder would be notified.
In principle, SME United welcomes a lean, uniform and efficient system in the internal market
instead of a patchwork of procedures across 27 Member States. It raises the question whether a 'one
size fits all' initiative can apply given the diversity and heterogeneity of crises (healthcare crises,
cyber-attacks, energy crises, etc.). Absent a procedure for identifying potential licensees, SME United
is concerned that SMEs might be neglected. The association demands mandatory consultation of
SME representatives, instead of possible invitation to meetings of the advisory board. Like the other
associations, it supports attaching priority to voluntary agreements. As an additional safeguard, it
proposes adding a court's approval to the steps in the granting procedure. It supports limiting
compulsory licences in time and mandating additional communication on the anticipated timeline,
including in times of crisis. Finally, SME United calls for more clarity on the consequences of
terminating a licence (Article 14(5)).

Academic views
Initial reactions to the Commission initiative favour a broad application of compulsory licensing.
Ellen 't Hoen considers that the proposed regulation should go further to truly protect public
health. She points out that compulsory licensing became popular in global healthcare to ensure that
low-priced HIV medicines could circulate in global trade. She notes that limiting the proposed
regulation to crisis situations is short-sighted. Specifically, access to innovations may be needed to
prevent a crisis or to address the high prices of novel treatments. Member States have difficulties
getting a better price when negotiating single-handedly with monopoly-holding pharmaceutical
companies. A compulsory licensing scheme would bolster their position. Additionally, the
compulsory licensing rules should empower the Commission to oblige the transfer of know-how to
the licensee, particularly where it is necessary for producing the product. She advocates that data-
and market exclusivity waivers should be available in all situations where the Commission or
Member States issue a compulsory licence related to medical products.
Olga Gurgula views the proposed rules as a hybrid between compulsory licensing and government
use. She emphasises that giving rights-holders the opportunity to express their views should not
delay the grant of a compulsory licence. To prevent abuse of the right to be heard, an explicit and
limited timeframe may be useful. She particularly emphasises that access to know-how, including,
where necessary, trade secrets, is critical in certain situations. For instance, where manufacturing
processes of a complex biological therapy (e.g. a vaccine) are protected by trade secrets, licensees
may not be able to reverse engineer the production process or to find a timely alternative. Therefore,
a balanced regime of compulsory licensing of trade secrets should be considered. She
acknowledges that the proposal contains useful provisions (Article 14(2) and Recital 32), but advises
to clarify that the Commission may oblige the disclosure of trade secrets, other confidential
information and know-how to achieve the objectives of compulsory licensing. In return, safeguards
should be put in place so that trade secrets are not stripped of their value.

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Pallavi Arora welcomes that Article 80(4) of the proposal for an EU pharmaceutical directive
suspends data and market protection (to the extent necessary) where a compulsory licence has
been granted. This would imply that generic manufacturers benefiting from a compulsory licence
could obtain marketing approval by using the originator's trial data, thereby avoiding delay of
market entry. Like Gurgula, she highlights the ambivalence around the sharing of know-how as the
biggest shortcoming of the proposal. She states that 'corporate responsibility should not become a
pretext for states to disregard their human rights obligations' and proposes compulsory licensing of
know-how. Drawing on academic articles by Levine and Sarnoff and Gurgula and Hull, she points
out that such mechanisms could be justified under Article 39(2) of the TRIPS Agreement on the
grounds that they are not 'contrary to honest commercial practices'. 10 She elaborates that, similarly,
'experts have interpreted the US Defence Production Act as authorising the President to compel the
disclosure of information needed to boost the production of critical commodities for national
defence purposes'. Additionally, she criticises the proposal's scope for being limited to crises and
that unitary compulsory licences can only be issued for an EU-wide crisis and not one affecting
specific Member States.
Matthias Lamping and co-authors consider that the Commission's initiative is both timely and
relevant. Compulsory licences would present an important tool to prevent or overcome stalled
negotiations, patent overprotection and insufficient access to essential patents. Like other
commentators, they believe that the reform should not be limited to crisis situations. Compulsory
licences should also be available to prevent a crisis and to ensure that relevant innovations are
accessible before a crisis creates a fait accompli. They suggest that lawmakers should consider a
general clause on compulsory licences in the public interest, complemented by a non-exhaustive
list of specific examples. They also mention that a product-based approach to compulsory licensing
sounds intriguing, but point out some uncertainties regarding its scope and granting procedure.
Additionally, they consider that prior negotiation should not always be strictly compulsory in crises,
particularly because, according to their reading of the TRIPS Agreement and the Doha Declaration,
prior negotiation may be waived for all emergencies, but not for all crises. For the latter case, they
suggest devising criteria determining at what point voluntary licensing can be deemed to have
failed. Furthermore, they suggest enabling the use of a patented invention by the government or
third parties authorised by the government. Like the other academic experts, they support rules
enabling access to complementary know-how. Access should only be denied where the balance of
hardships tips towards the patentee. Since know-how may present a trade secret, the Commission
should issue clarifications on the scope of trade secret protection and on how to account for public
interest or legitimate interests recognised by EU or national law. Similarly, it would be helpful if the
Commission developed sector-specific guidelines and recommendations as regards remuneration.
Finally, they call for a clear and harmonised understanding of basic concepts and terminology (i.e.
crisis, emergency, urgency, etc.).
Apart from the literature specifically addressing the Commission initiative, academics have been
studying the risks and welfare implications of compulsory licensing in different settings.
Feldmann, Reichman, Ho and Epstein and Kieff summarise the dangers and harms associated with
compulsory licensing. These include potential loss of foreign direct investment, reduced incentives
to innovate, a possible decline in global health, a deterioration of economies with significant
pharmaceutical industries, abuse of compulsory licensing, and risk of retaliatory action and trade
wars. 11 It is worth noting that risks depend on the specific market settings and would be different
for high-income countries and developing countries. Economies may well provide for irresistible
market opportunities that offset risks created by compulsory licensing. Other scholars, such as
Scherer, Moser and Voena (policy brief), Baten et al., and Chien, survey historical developments and
have a more optimistic view of compulsory licensing. Favourable effects prevail where the increase
in innovation based on compulsorily licenced patents compensates for any decrease in innovation
arising from the fact that the compulsory licensing scheme makes it possible to bypass patent
protection. Additionally, compulsory licensing may spur welfare and thereby enhance follow-on
innovation. Barnett casts doubt on the validity of findings based on insights from the post-WWI era,

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 Compulsory licensing of patents for crisis management

because other factors including public funding and high market concentration may have facilitated
innovation, and because innovation activity started declining in the mid-1960s. 12 Taking a
theoretical approach, Seifert concludes that 'compulsory licensing has an ambiguous effect on total
welfare, but is more likely to increase total welfare in industries that are naturally less competitive'.
In cases of health crises, the derived benefit for consumers would carry even more weight, thereby
further strengthening the case for compulsory licensing relative to his main findings. For a more
extensive overview, see Macrowitz-Bitton and Kaplan and Annex V of the Commission study on
Compulsory licensing of intellectual property rights.

Legislative process
In the European Parliament, the proposal was assigned to the Committee on Legal Affairs (JURI),
which appointed Adrián Vázquez Lázara (Renew, Spain) as rapporteur. The JURI committee adopted
its draft report on 13 February 2024, and Parliament voted its position (CLCM-Parl) at first reading
on 13 March 2024. This position would form the basis of Parliament's negotiating mandate in the
new term. Compared with the Commission proposal, Parliament suggests:
 giving greater priority to voluntary agreements over compulsory licences by providing
parties with 4 weeks to reach an agreement before the Commission may grant a
compulsory licence (Articles 1(1) and 4(1) CLCM-Parl);
 strictly limiting compulsory licences to what is needed for addressing the crisis at hand
(Article 5(1)(b) CLCM-Parl);
 mandating that the Commission must 'take utmost account' of the advisory body's
opinion and justify any decision that does not follow the opinion (Article 7(2a) CLCM-Parl);
 expanding the advisory tasks of the advisory body to assisting the Commission with
assessing whether the voluntary agreements have been prioritised appropriately and
determining crisis-relevant products (Article 6(2)(aa) and (ba) CLCM-Parl);
 mandating that the Commission must, where possible, invite Parliament representatives
to the advisory body meetings (Article 6(4)(aa) CLCM-Parl). The Commission would be able
to invite representatives of national compulsory licensing authorities as observers, but
inviting right holders is no longer foreseen (Article 6(4)(b) CLCM-Parl);
 clarifying that it is the licensee who is responsible for liability or warranties related to the
production or distribution of the product (Article 5(1)(fa) CLCM-Parl); 13
 mandating that the Commission must identify all rights-holders before granting a
compulsory licence or refrain from granting it (Articles 7(4) and Recital 25 CLCM-Parl);
 stipulating that the rights-holder should receive remuneration within a pre-established
timeframe (Article 9(1a) CLCM-Parl);
 in principle, deleting the 4 % cap on remuneration (Article 9(2) and 23(1)(a) CLCM-Parl);
 empowering the Commission to compel rights-holders to disclose relevant trade secrets
and know-how that are strictly necessary to achieve the purpose of the Union compulsory
licence (Article 13a CLCM-Parl) in exchange for appropriate remuneration (Articles 9(3)(da)
and 13a(4) CLCM-Parl) and under conditions of confidential treatment by the licensee
(Articles 10(1)(cb)-(cd) and 13a(3) CLMC-Parl);
 mandating that the Commission would have to justify its rejection of the licensee's or
rights-holder's observations on the envisaged fines or periodic penalties (Article 19(2a)
CLCM-Parl).
At time of writing, the Council is still preparing its position.

EUROPEAN PARLIAMENT SUPPORTING ANALYSIS

Efthymiadou A. and Frizberg D., Intellectual property: A revised framework for compulsory licensing of
patents, Initial Appraisal of a European Commission Impact Assessment, EPRS, European Parliament,
October 2023.

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EPRS | European Parliamentary Research Service

ENDNOTES
1
If not otherwise specified, the articles cited in this briefing refer to articles from the Commission proposal.
2
Explanatory memorandum of the poposal on compulsory licensing, COM(2023) 224 final, European Commission,
27 April 2023 (CLCM-COM). As stated in the accompanying impact assessment, 'the term ''compulsory licence'' is
found in national patent laws but not in the TRIPS Agreement where article 31 refers to the ''use [of patents] without
authorization of the right holder'' '.
3
See Tables 19-21 of Annex 6 to the impact assessment accompanying the CLCM-COM, pp. 96-105; Compulsor y
licensing of intellectual property rights, study, European Commission, 2023, pp. 24-55; Compulsory licensing in
Europe: A country-by-country overview, European Patent Office, 2018.
4
For a visual presentation of the procedure, see Figure 23 of Annex 6 to the impact assessment, SWD(2023) 121 final,
European Commission, 27 April 2023, p. 133.
5
See Figures 15 and 16 of Annex 6 to the impact assessment accompanying the CLCM-COM, p. 87.
6
In view of the difficulties experienced in securing patent protection, some Member States offer a lesser form of
protection for certain innovations, known as utility models or petty patents. Like patents, this protection grants 'an
exclusive right, which allows the right holder to prevent others from commercially using the protected invention,
without his authorization, for a limited period of time'. The rationale of these models is similar to that of patents. The
World Intellectual Property Organization (WIPO) recognises that 'minor improvements of existing products, which do
... not fulfil the patentability requirements, may have an important role in a local innovation system'. Due to difficulties
in reaching an agreement, work on an EU-wide utility model protection was suspended in March 2000.
7
Supplementary protection certificates (SPCs) are an intellectual property that serve as an extension of patent rights.
They are granted to offset the loss of patent protection caused by lengthy authorisation procedures before the rights-
holder is able to exploit or commercialise the product. The term of patent protection starts diminishing from the date
the application is filed, whereas subsequent lengthy testing and clinical trials may prevent the rights-holder from
marketing the product. Consequently, such authorisation procedures eat into the patent-protected marketing period.
If their commercialisation activities are not protected sufficiently long from competition, rights-holders may not be
able to recoup their research and development costs. This prospect would stifle innovation. Against this backdrop
and international regulatory competition, the EU enacted SPCs for pharmaceutical and plant protection products, to
make it possible to extend patent protection by up to 5 years after the standard 20-year protection period expires.
8
This section aims to provide a flavour of the debate and is not intended to be an exhaustive account of all different
views.
9
In 2020, the generics industry published a report on a range of monopoly-extending tactics.
10
For opposing views, see E.M. Solovy and D. Raju, 'Recent Threats to Global Trade Secret Protection: Why Compulsor y
Licensing Is Not (and Should Not Be) a Viable Legal Option', Center for Intellectual Property x Innovation Policy,
George Mason University; R. Hauck, 'Gibt es die „Know-how-Zwangslizenz“?', Gewerblicher Rechtsschutz und
Urheberrecht in der Praxis, Vol. 13(12), 2021, pp. 333-335.
11
Countries such as the United States are criticised for acting inconsistently, see S. Kumar, 'Compulsory Licensing of
Patents During Pandemics', Connecticut Law Review, Vol. 54(1), 2022, pp. 57-104; E. McDermott, Proposed Framework
on March-In Rights Dubbed ‘Unprecedented’ by U.S. Chamber, IPWatchdog, 2023.
12
It is worth noting that he draws conclusions for an overall weak property-rights regime, which includes but is not
limited to compulsory licensing, and he does not make causal claims.
13
It appears uncertain whether this should cover damages resulting from using the procedure as described in the patent.

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Second edition. The 'EU Legislation in Progress' briefings are updated at key stages throughout the legislative
procedure.

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