Intangible assets such as inventions, trade secrets and know-how are the cornerstone of the EU economy and competitiveness. Patent rights, in particular, play a key role in supporting EU innovation and creating the right environment for investment. For European innovation to flourish, a solid, predictable, and flexible legal framework for intellectual property rights, including patents, needs to be created. The Unitary Patent system helps further improve and harmonise the EU legal framework on patents. Beyond this, the Commission action plan on intellectual property rights has identified several areas of patent law that need to be further improved and harmonised. One of these areas is compulsory licensing. The COVID-19 crisis highlighted that an appropriate balance between patent rights and other rights and interests is a staple of the patent system. During the COVID-19 crisis, the conflicting interests were access to health products and preserving innovation incentives that are key to developing new health products, such as vaccines and therapeutics. The pandemic added another element to the discussion: the role intellectual property rights could and should play in a crisis. In other words, the question became: how we can preserve the balance and incentives for innovation while ensuring swift access to critical products and technologies in crises, even in the absence of voluntary agreements. Patent law already provides a solution: compulsory licensing.

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. Compulsory licensing can therefore complement current EU efforts to improve its resilience to crises. In the aftermath of the COVID-19 crisis, the EU has tabled several EU crises instruments, such as the Proposal for a Regulation establishing a Single Market Emergency Instrument (SMEI) or Council Regulation (EU) 2022/2372 of 24 October 2022 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 to products needed to tackle a crisis in the Internal Market. The instruments focus on voluntary approaches. As evidenced by the COVID-19 crisis, voluntary agreements remain the most efficient tool to enable rapid manufacturing of patent-protected products, including in crises. However, there may be cases where such voluntary agreements are not available or appropriate. In such circumstances, compulsory licensing can provide a solution to allow the rapid manufacturing of products needed to tackle a crisis. However, to guarantee that such products can freely circulate within the Internal Market and reach all those in need, the compulsory licensing shall be granted at EU level.

Compulsory licensing has a dual role, as it can incentivise the conclusion of voluntary agreements and also enable the manufacturing of products needed to tackle a crisis in the absence of (appropriate) voluntary agreements. However, for compulsory licensing to fulfil this role, an efficient compulsory licensing scheme needs to be built in the EU, able to rely on the Single Market, complementing EU crisis instruments and in line with the EU’s international obligations.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (‘TRIPS Agreement’) sets the international legal framework on compulsory licensing. Article 31 of the TRIPS Agreement provides the framework for compulsory licensing in relation to the domestic market, while Article 31bis of the TRIPS Agreement provides the rules for compulsory licensing for the manufacturing and export of pharmaceutical products to countries with public health problems.

There is currently no EU-wide harmonisation of compulsory licensing for the domestic market, including as regards European patents with a unitary effect. Instead, there is a patchwork of different national rules and procedures on compulsory licensing. National rules have insufficient territorial reach, since products manufactured under a compulsory licence in one Member State either cannot be supplied to another Member State, or can only be supplied in limited quantities. National procedures are also different from each other, and decision-making is not coordinated at EU level. This limits the ability to rely on the Internal Market to guarantee supplies across all the Union territory.

Against this background, this initiative aims to provide the Internal Market with an efficient compulsory licensing scheme for crisis management. The initiative has therefore two main objectives. First, it aims to enable the EU to rely on compulsory licensing in the context of the EU crisis instruments. Second, it introduces an efficient compulsory licensing scheme, with appropriate features, to allow a swift and appropriate response to crises, with a functioning Internal Market, guaranteeing the supply and the free movement of crisis-critical products subject to compulsory licencing in the internal market.