Should the United States Expand Compulsory Patent Licensing?

Many nations across the world permit compulsory licensing of patents for a variety of reasons. In some cases to address the failure of a patent holder to “work” the patented device. In other cases, for public interest reasons such as producing affordable drugs to prevent an epidemic. International law does not prohibit this practice. Article 31 of the Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) permits compulsory licenses to be issued without authorization of the patent holder in cases of national emergency or extreme urgency provided that due process requirements are met. However, in the United States the general rule is that compulsory licensing is not permitted.

 

Yet, despite the general approach of not allowing compulsory licenses, there exist a few notable exceptions in US law. Federal Law permits the United States to use inventions covered by a U.S. Patent without license. Where the US uses an invention without license, the patent owner is entitled to compensation from the US. Compulsory licenses can also be issued because of anti-trust laws and can be issued under certain U.S. Laws such as the Clean Air Act.

 

It may be surprising to some, but issues involving compulsory licenses do get litigated before US federal Courts. For example, in 2001 in Crater Corporation v. Lucent Technologies, the US court of Appeals for the Federal Circuit found that Lucent could not be held liable for patent infringement because any work it did with a device (despite the device being patented by Crater) was done through a government project authorized by the United States.

 

It has been suggested by various people and groups that legislators should expand the practice of compulsory licensing in the United States. It is argued that compulsory licenses are an effective tool for correcting market failures that result from the exercise of market power or abuses of patent ownership. Just imagine, compulsory licenses being issued left right and center for patented inventions that are not being produced and distributed in the market place? In some ways that would be appealing because ultimately what is the use of an invention if its utility is not transferred to the broader society? I am sure some Tech companies would no doubt jump at the expansion of compulsory licensing to thin out patent thickets that slow down the development of their products. However, there is another side to the story.

 

The present approach in the United States reflects the recognition by policymakers that acts of compulsory patent licensing can adversely affect the US economy. Regularizing the issuance of compulsory licenses could negatively affect the psychology of businesses and investors in an economy where strong intellectual property rights play an important role. Businesses may become more distrustful of doing business in the United States if there is less certainty in their intellectual property rights. Investors may become less inclined to invest in research and development and other activities that result in innovation and lead to the issuance of patents. These considerations must be weighed against providing the courts with broader powers to issue compulsory licenses.