Crisis preparedness: Council adopts position on compulsory licensing regulation
The Council has adopted today its negotiating mandate on the regulation for compulsory licensing for crisis management. A compulsory licence is the possibility for a government to allow a third party to use an intellectual property right without the authorisation of the rights-holder. The Council’s position adopted today clarifies the scope of the regulation, redefines the decision-making procedure, reinforces the rights of rights-holders, and limits the number of legislative acts that can activate the crisis or emergency mode under which a Union compulsory license can be issued.
“Europe will always be a place where intellectual property is protected. In crisis situations, we must do whatever it takes to protect our citizens. This regulation makes sure that compulsory licensing will be easily available at EU level for exceptional circumstances.”
Pierre-Yves Dermagne, Belgian Deputy Prime Minister and Minister of the Economy and Employment
Reinforce crisis preparedness
In crisis situations (i.e. a pandemic or a natural disaster), compulsory licensing can help provide access to key products and technologies, when, for example, the holder of a patent does not have the capacity to produce the necessary amounts of a key product, and a voluntary agreement is not available or feasible. Currently, compulsory licensing mechanisms are regulated only at national level, which could result in a fragmented approach in cases of cross-border crises or emergencies and does not consider the cross-border supply chains inherent to the internal market. For this reason, it was necessary to set up a compulsory licensing mechanism at EU level (‘Union compulsory licence’).
The Commission’s proposal aimed to allow the EU to rely on a compulsory licensing framework for crisis management applicable in the whole territory of the EU. The Union compulsory licence would be closely linked to crisis instruments, such as the internal market emergency and resilience act (IMERA, known before as single market emergency instrument or SMEI). The proposal made sure that the Union compulsory licence would only be granted after the activation of an emergency or crisis mode at EU level. The determination of the existence of a crisis or emergency is therefore not defined by the regulation on compulsory licensing but rather by the relevant EU crisis instrument. The Union compulsory licensing mechanism will serve as an alternative in crises when voluntary agreements are not available, and it will ensure an appropriate territorial reach of compulsory licensing to cover cross-border supply chains. The proposed regulation contained a list of EU crisis instruments that can trigger a Union compulsory license.
Council’s mandate
The Council’s negotiating mandate restructures the procedure of granting a compulsory licence at EU level to protect the rights of the intellectual property rights-holders and ensures that they are better informed throughout the procedure. The roles of the advisory body and the national intellectual property experts are also strengthened in the decision-making process. Furthermore, the negotiating mandate establishes that, when a license is granted to a licensee during a crisis, the rights-holder must be remunerated. In the Council’s negotiating mandate, this remuneration, to be established by the Commission on a case-by-case basis, can go beyond the cap of 4% of the total revenue generated by the licensee, as proposed by the Commission.
The Council’s position underlines the ‘last resort’ nature of any compulsory licensing decision, meaning that it should only be used when voluntary agreements are not available or adequate.
The mandate reduces to three the number of legal instruments that can activate compulsory licensing: IMERA, the regulation on serious cross-border threats to health, and the regulation on measures for ensuring the supply of crisis-relevant medical countermeasures in the event of a public health emergency. The Council’s position also clarifies that the regulation will not apply to defence-related products. In addition, the mandate protects rights-holders from having to disclose trade secrets.
Next steps
The compromise text agreed today formalises the Council’s negotiating position, providing the Council presidency with a mandate for negotiations with the European Parliament.
Background
In the aftermath of the COVID-19 crisis, the EU tabled several crisis instruments at European level, such as the internal market emergency and resilience act (former SMEI) and a Council regulation on a framework of measures for ensuring the supply of crisis-relevant medical countermeasures in the event of a public health emergency at Union level. These instruments provide the EU with a means of ensuring access and the free circulation of products needed to tackle a crisis in the internal market.
The instruments focus on voluntary approaches, which remain the most efficient tool to enable rapid manufacturing of patent-protected products, including in time of crises. Yet, in some cases where such voluntary agreements are not available or feasible, compulsory licensing can provide a solution to allow the rapid manufacturing of products needed to tackle a crisis.
The Commission proposed an initiative on compulsory licensing for crisis management on 27 April 2023. The European Parliament adopted its position on 13 February 2024.
