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Compulsory licenses in austria by dr. daniel alge, march 2000

Compulsory Licenses in Austria
1.: Historical development of the regulations in the Patent Act:
The instrument of compulsory licenses has been provided with the first Patent Act of1897 as a measure to counter the patent right in the case of (reasonable) publicdemand for a patented invention or misuse of the patent right, e.g. by non working animportant invention in Austria. Another measure was revocation of the patent, whichwas relativated due to the amendment of the Paris Convention (PC) in 1925 (TheHague), when it was regulated in the law that revocation due to non-working is onlypossible, if the grant of compulsory licenses has not been successful for remedy ofthe situation (in accordance with Art. 5A PC (lit.1)).
From the very beginning, three possible constellations for compulsory licenses or –up to 1925 (resp. 1928, when this PC amendment was introduced into the AustrianLaw) – revocation – have been addressed in the law: 1. dependency: if a younger patent (i.e. a patent with a younger priority) is dependant from an older patent and therefore cannot be worked withoutpermission of the owner of the older patent, the owner of the younger patent mayget a compulsory license for the older patent.
2. non-working: the invention is not worked in Austria 3. public interest: the grant of a compulsory license to an invention is in the public The regulations for compulsory licenses have been amended several times from1899 to date, making substantive modifications to the law. Perhaps the mostimportant and substantive amendments were made with the two TRIPs relatedamendments in 1996 and 1998, thereby taking full credit to TRIPs Art. 31. Especiallywith regard to the latest TRIPs connected amendments, Article 36 of the AustrianPatent Act (APA), which contains all the regulations with respect to compulsorylicenses for Austrian patents, has - in its current state - not necessarily to be seen asthe result of a continuous development of Austrian law and jurisdiction from 1899 upto now, but rather containing young law, clearly amending the „old“ Austrian law andpractice (where it contradicted TRIPs).
2.: The comparison between „old“ and current law
(important changes are indicated by bold letters) 36: (1) The patentee of an invention of
36: (1) If a patented invention cannot be exploited considerable commercial or industrial
without infringing on an invention with a better significance which cannot be worked without the
priority (earlier patent), the owner of the later patent use of an invention patented earlier (the earlier shall have claim to a non-exclusive license in the patent), may apply for a license to work the earlier earlier patent, if the invention protected by the later patent. Where such license is granted, the earlier patent constitutes an important technical
patentee may demand a license to work the later advance of substantial economic significance
patent, to the extent that the two inventions are in relative to the invention protected by the earlier
patent. Where such license is granted, also the
owner of the earlier patent shall have claim to a
non-exclusive license in the later patent.
(2) Where a patented invention is not worked (2) If a patented invention is not worked to an sufficiently in Austria and where the patentee has adequate extent in Austria, in which context
not taken all steps required for such working, any importation also constitutes working, and the
person may apply for a license to work the patent
patentee has not undertaken everything necessary for the purposes of his business, unless the
for such working, anybody has a claim for his patentee shows that the invention could not business to a non-exclusive license for the patent reasonably have been worked, or could not unless the patentee proves that the working of the reasonably have been worked to a greater extent, in invention in Austria cannot reasonably be expected Austria owing to difficulties of exploitation.
at all or on a larger scale than actually effected, dueto the difficulties opposing such working.
(3) If a license for a patented invention is required
(3) If the grant of a license for a patented invention in the public interest, any person may apply for
is in the public interest, anybody shall have a
such license for the purpose of his business.
claim for his business to a non-exclusive license
for the invention. With respect to the federal
administrative authorities, such a claim is not bound
to an undertaking.
(4) A license (paragraphs (1) to (3)) may not be (4) If the person entitled to grant a license
applied for until four years after the filing of the according to paragraphs (1) to (3) refuses grant
application, or three years after publication of the of the same, although the applicant for the
grant, relating to the patent for which the license is license has taken efforts to obtain his consent
sought, whichever period expires last. If the within a reasonable term and at reasonable
patentee refuses to grant a license on
conditions common in business, the Patent Office
reasonable terms, the Patent Office shall, at the
shall, on request of the applicant for the license, request of the applicant for the license, decide the decide in patent contestation proceedings. In case a matter under the procedure relating to the license is granted, an adequate compensation is
contesting of patents, and if the license is granted, to be determined, wherein the economic value of shall fix the royalty, the security which may be
the license is to be taken into consideration. The requires and any other terms governing use, having security, if necessary, as well as the other regard to the nature of the invention and the conditions of use shall be determined considering the nature of the invention and the circumstances of
the respective case. The extent and the duration of
the license according to paragraphs (1) to (3) shall
be granted primarily for the supply of the market in
Austria and shall have to be limited to the purpose
which has made them necessary
(5) Paragraphs (1) to (3) shall not apply to patents (5) The grant of a license according to paragraph 2 of the federal administrative authorities.
may not be requested until four years from the
notification of the grant of a patent for which the
license is sought; whichever period expires last.
(6) The requirement of obtaining the consent of the
person entitled to grant a license may be
disregarded in the case of paragraph (3), if a state
of national emergency or other circumstances of
the uppermost urgency prevail
. In this case, a
preliminary permission to use the invention shall be
given by interim decision.
(7) A granted license according to paragraph (4) has
to be rescinded upon request subject to a
reasonable protection of the legitimate interests of
the persons entitled, if and when the conditions
which have led to the same cease to exist and are
likely not to rise again. The Patent Office decides on
such a request in the proceedings prescribed for the
contestation of patents.
Indeed, these amendments have flawed many of the old decisions (indeed, most ofthe decisions to the prerequisites for compulsory licenses have been made not indecisions concerning the demand for compulsory licenses, but in cases whererevocation of the patent was demanded, because the grounds were the same (thiswas especially “popular” in the years from 1900 to 1915).
With the latest amendments, it was made clear that “working in Austria” may also beperformed by importation. Moreover, the possibility of taking back the compulsorylicense was written into the law. Other changes in the text may be regarded asclarifications resembling both, clarification of the Austrian practice as well as explicitlyincorporating the exact wording of the TRIPs regulations contained in Art. 31.
3.: The current Law:
Interpretation of the current wording in view of the decisions and the legislativemotives.
In the present analysis, the three types of possible compulsory licenses are viewedseparately, because they essentially differ in their nature, legal and public motivesand history. This is also the common position of jurisdiction, legislation and legalcommentaries.
The decision practice in Austria does not regard the grant of a compulsory license asan expropriation, but something very close to it (termed as “compulsory lease” indecision Op 1/72 of the Austrian Supreme Patent and Trademark Senate) “Certainly, the grant of a compulsory license is not an expropriation in the strictmeaning of this term, because an assignment of property rights or other private rightsfrom the current to another legal entity would be characteristic (.); however, it is alimitation of the patent right, namely an inventory contract, especially a compulsorylease.” Background of the case according to the decision of the Supreme Patent andTrademark Senate (OPM) of 26 June 1972 in the case Op1/72: An Austrian firm Aasked for a compulsory license for the Austrian patent 244.948 of the Britishcompany B concerning the production of Inderal® (propanolole hydrochloride).
Inderal® was imported to Austria, but not produced (Austrian market: 69,74 kg (1966-1968); worldwide production: 9500 kg (1968); development costs up to 1969: 2,5 Mill.
ATS). The Nullity Department granted the compulsory license with a license fee of14,5 %. The OPM followed the patentee as appellant and rejected the demand forcompulsory licenses, mainly because no misuse was connected with the soleimportation of Inderal® (which was sold in Austria – according to the OPM’s opinion -to a “reasonable” price) and the production for Austria would be an uneconomicalburden for the patentee. A public interest for a license under Art.36(2) APA, however,was not seen as necessary requirement – in contrast to a license under Art.36(3).
In this respect, some commentaries have distinguished between compulsory licensesdue to dependency and non-working and those due to public interest. Whereas thefirst ones have been regarded as “legal servitude of the inventor ‘s neighbour right”, the latter is often also defined as “expropriation of the right to use” (especially oldcomments to the Austrian Patent Act follow this opinion, which might be due to thefact that in the time before 1918 there was the possibility of the free use of patentedinventions by the army under (the public interest aspect of) compulsory licenses).
Since the possibility of deciding whether one will exploit a right himself or let othersexploit the right has been regarded (even by the European Court of Justice (ECJ)) asone of the main features of intellectual property rights, licenses by law or compulsorylicenses have been excluded or been limited to severe exceptional cases.
It is therefore generally accepted that compulsory licenses are granted only in case ofparticularly serious reasons (“consensus with the public interest is necessary”,“justified only when general interests worthy of protection are given and not onlyinterests of a licensee”, “a high standard has to be applied”).
This is also in line with the international practice, especially since the United Kingdom(1977) and Canada (1993) have changed their laws in this respect (see an article ofS.Greif, GRUR Int. (1981), page 733).
A compulsory license may also be granted for only part of the patent, if a normal(“voluntary”) license is conceivable.
Another prerequisite for the grant of the compulsory license is that the patentee hasrefused to grant a license to the petitioner. It has been decided that a refusal oflicense does not have to be necessarily an explicit refusal; a correspondingbehaviour of the patentee may be sufficient. An offer for a voluntary license which isoffered after the filing of the demand for a compulsory license does not have to beconsidered by the applicant for the compulsory.
3.1: Compulsory licenses due to dependency (Art.36(1)):
Art. 36(1) clearly stipulates that a prerequisite for such a license is dependency, i.e. ifthe commercial use of an invention is unconditionally connected with infringement ofthe older.
A compulsory license due to dependency is only possible, if the invention of the laterpatent constitutes “an important technical advance of substantial economicsignificance relative to the invention protected by the earlier patent”. Whether aninvention being “an important technical advance of substantial economicsignificance”(directly taken from TRIPs) is comparable to the former expression(invention of “considerable industrial importance”) remains to be clarified by thecourts, the motives to the amendment and the TRIPs give no clear indication in thisrespect. What is accepted is that with the TRIPs wording, a new aspect is brought indue to the necessity that the significance should (also ?) be given vice versa the oldpatent.
In the Austrian practice, the “considerable industrial importance” was regarded as an“important progress in the respective field”. Therefore, the state of development ofthe specific line of business has to be examined, as well as the progress, which has been achieved with the older invention (implying already an examination with respectto the older patent as required by TRIPs). This (commercial) progress (which theyounger patent brings) must be large for the specific line of business and of far-reaching economic significance. A simplification or an enlargement in scope of theeconomical development potential of this field is not enough. Considerable industrialimportance of an invention is not proven by the cheapness of an industrial.
3.2.: Compulsory licenses due to non-working (Art.36(2)):
It is mostly accepted that the regulations in the PC (Art.5A, para (2) – (4)) only referto this type of compulsory licenses (see also: commentary of Bogenhausen to thePC). These regulations have always been interpreted to be measures to fight misuseof the patent right:“From the motives [to the Patent Act Amendment 1928] follows with undoubtful claritythat the measure of compulsory licenses has been constructed against misuse of amonopoly status and that the reasons of inequity and lack of economy of domesticworking of an invention have to be carefully considered.” Some commentaries indicate that the prevention of abuses which might result fromthe exercise of exclusive rights conferred by a patent hold for all types of compulsorylicenses. This, however, is in contrast to the memoranda to the PC, especially to theLisbon amendment, and has also been doubted in the latest decision in Germany tocompulsory licenses.
An important amendment has been introduced with the TRIPs adaptation, namely theclarification that working by importation is to be considered as working of theinvention and thus excludes a compulsory license because of Art.36(2). Before thisamendment, the fact that import into Austria has been taken place was considered inthe context of misuse and excuses for non-working (see supra).
Another prerequisite for a compulsory license according to Art.36(2) is that theapplicant has to have a business which allows him to work the invention both,technically and economically; this, however, does not exclude that partial works,preparative works, etc. are performed in other person’s workshops.
With respect to the extent of the working of the invention it has been decided that it isirrelevant whether the patent covers a de luxe article or a necessary item. The duty ofworking is restricted to the patented invention and does not go beyond this invention(if a special part of a machine is subject matter of a patent, there is no duty toproduce the whole machine). The working of the invention does not have to beextended to all alternatives covered by specific claims. The patentee has the choicebetween the possible ways to perform the invention.
The appropriateness of the working conducted by the patentee has to be examineddue to the peculiarities of each single case. The complete activities of the patenteehave to be considered. These activities should show an serious, purposeful,extensive and continual activity of the patentee in the direction of working.
Examples of working to a non-adequate extent have been regarded: advertisements looking for purchasers or licensees for the patent solely isolated selling or licensing offers in magazines isolated and schematic notices about the grant of licenses the mere willingness of the patentee to consider appropriate license offersthrough the initiative of third persons without acting positively on his own the isolated production of single components of a protected invention without adefinite, purposeful plan and with long intermediates between the single activity for production of a patented subject matter; a continuingproduction has to be intended and all the preparations for such a continuingproduction have to be performed by the patentee production of only a limited amount of devices for the patentees own customersthereby preventing the use of the invention for other undertakings Potential excuses for non-working (or only limited working) are:- insurmountable obstacles i.e. obstacles which are not removable by seriousassistance financial losses being higher than the typical losses at the, i.e. financiallyinsurmountable obstacles The patentee holds the burden of proving the working to an adequate extent.
3.3. Compulsory licenses due to public interest (Art.36(3))
Under “public interest” all interests of legal, economic and social life are to beunderstood, especially such of public health (the difference between “generalinterest” (Allgemeininteresse; Art.36(1) and (2)) and public interest (öffentlichesInteresse; Art.36(3)): general interest may even be present in single branches ofeconomy, whereas a public interest has to be more than that).
A simple reduction in price of an industrial product is not sufficient for public interestjustifying a compulsory license, but economic interests may also be considered.
Reduction of unemployment does not justify a compulsory license in public interest.
Public interest is not excluded by the fact that the grant of a compulsory license alsosatisfies the private interests of the licensee.
According to the latest German decision (BGH, X ZR 26/92) it has also to beconsidered whether such public interest may also be satisfied by other measures orpossibilities than compulsory licenses (in Germany, public interest is necessary for allforms of compulsory licenses).
The facts around the German decision of the Federal Supreme Court (BGH) of 5December 1995 (Case No. X ZR 26/92): The applicant for a compulsory license for apatent with product claims to γ-interferon. The licensee of the patentee already sold γ-interferon products (Actimmune and Imukin) for the treatment of chronicgranulomatosis. The applicant had a Europe wide approval for the γ-interferoncontaining medicament Polyferon for treating rheumatoid arthritis and hadunsuccessfully requested for a license for the product patent. Polyferon was the drug with – by far the most promising results for treating rheumatoid arthritis; however,according to the patentee’s own clinical results, this effect of γ-interferon does notseem to be finally proven. The first instance granted the compulsory license against apayment of 8 % license fee, because there was evidently public interest for thistreatment. The patentee appealed and argued that a license fee of 40 % would beappropriate. The BGH overruled the first instance mainly because of the opinion ofthe court expert that the public interest for the demand for treatment of rheumatoidarthritis may also be satisfied by the γ-interferon products being already on themarket. A doctor could prescribe Actimmune and Imukin also to patients withrheumatoid arthritis, if he regards it as successful.
Article 5 PC
Article 31 TRIPs
IIC Studies, Volume 18, pages 202-208 (lit.4a) and 338-341
ÖBl.(1973), pages 4-9
GRUR Int. 1981, page 733
IIC 28 (1997), pages 242-250

Source: http://www.sonn.at/e/publikationen/compulsory_licenses.pdf

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