Rules of engagement

Diana Portna of D&L IP Group explains how Ukraine’s compulsory licensing laws could be opened up for the public interest, and how rights owners could react

Patent protection granted by the state is always a balance between an inventor’s entitlement to the material proceeds from his or her intellectual pursuits and his or her responsibility towards the advancement of science and technology at large. There is also the obligation to contribute required technology to ensure security, health and sound environmental conditions for the general public in times of specific need.

Although compulsory licensing has proven to be scarcely used in practice worldwide, clients need to take these rules into consideration to determine country-specific patent requirements and assess the potential risks of losing control of rights.

One of the recent developments now defined in the draft law of Ukraine, but yet to be adopted, might allow manufacturers of generic drugs to benefit from compulsory licence provisions of the local law and get into the market over the head of the patent owner based on social need of less expensive vital drugs. Compulsory licensing laws open up opportunities for unfair play, especially in corrupt environments and in times of ongoing military conflict in the country, which could be advantageously used to establish required circumstances for a creative licence seeker.

The legal framework for compulsory licensing in Ukraine is set out in the Law of Ukraine on Protection of Rights in Inventions and Utility Models (Article 30), as well as in the Law of Ukraine on Protection of Rights in Designs (Article 23), meaning compulsory licensing may relate to inventions, utility models and industrial designs.

The law establishes the following conditions for the grant of a compulsory licence:

  • The invention, utility model or industrial design is not used or is not adequately used in the jurisdiction

  • The patent owner refuses to grant a licence to an interested party

  • Public safety requires the use of the technology to secure essential public interests in a time of need

Based on the law, there is no requirement for the patent owner to routinely confirm that the invention, utility model or industrial design is actually being used in Ukraine.

In some countries, such as India, the owner has to proactively file a working patent declaration to show use in the country. In Ukraine, there is no such requirement. Third parties, however, that are willing and ready to use certain patented technology have options to use inventions, utility models and designs that are not adequately used by the patent owner where the patent owner refuses to grant a licence on such an invention, utility model or industrial design.

There are two avenues to obtain a compulsory licence in Ukraine:

  • Administrative: Exercised by the government in the public interest

  • Civil: Exercised by individual entities that are willing and ready to use the invention in the absence of consent from the patent owner.

The administrative avenue is chosen when public interests or public security are at stake. In this case, the cabinet of ministers is taking it upon itself to grant a licence on the invention, utility model or industrial design to a specific entity without the consent of the patent owner if it refused to grant a licence without legitimate grounds.

Limitations of the compulsory licence include:

  • Granted for the internal market only

  • The patent owner can still grant licences to other entities

  • The licence is terminated as soon as the circumstances that warranted its grant cease to exist or change

  • The patent owner must be adequately compensated based on the value of the right

  • The rights are granted together with the enterprise and or part of business practice that facilitates implementation

  • The owner should be properly notified of the grant of a licence

Based on the above, we can conclude that administrative avenue has the following prerequisites:

  • Extraordinary circumstances and/or established public need

  • Refusal by the owner to grant a licence without legitimate reasons

The law is very vague as to what those circumstances are.

It leaves the patent owner with a level of uncertainty and the willing licensee with much leverage, especially in view of the ongoing struggle to elevate government corruption in our jurisdiction, as well as the military conflict that could easily become a catch-all ground for establishing extraordinary circumstances.

The civil option can be exercised in the form of a legal suit filed with the local court to request a compulsory licence from the patent owner, if it refuses to voluntarily grant a licence without proper cause.

One of the conditions is that the invention, utility model or industrial design has not been used or not adequately used in Ukraine during three years from publication date, or within any three continuous years of the validity of the patent.

In this case, any entity willing and ready to use the objective of the patent may file a court action requesting the court to grant a compulsory licence.

Unless the patent owner provides persuasive arguments explaining legitimate reasons for non-use, the court may decide to grant such a licence to the petitioner, defining the scope, royalty and term, basically concluding the agreement between the parties.

Based on the above, compulsory licences can only be granted through court action where the following conditions are present:

  • Non-use or inadequate use of the underlying invention, utility model or industrial design without adequate cause during any continuous three years of the validity of the patent

  • Refusal by the patent owner to grant a licence

The patent owner is also obligated to grant a licence to a rival who filed a later application for the same invention, utility model or design, if its subject is directed to another goal or has overwhelming technical and economic benefits and may not be used without violation of the rights of the prior patent owner. The licence would be limited to the scope specifically needed to achieve the purpose of the later invention, utility model or industrial design and the earlier patent owner can request a reciprocal licence on reasonable terms. While there is no established practice for compulsory licensing in Ukraine, the country could soon follow jurisdictions such as India, Brazil and Thailand that have granted compulsory licences in the pharmaceutical field:

  • Rwanda: In 2007, Apotex requested a licence from four pharmaceutical companies for pharmaceutical preparations that were the elements of the compound under the brand name TriAvir, which it manufactured to treat AIDS. Apotex specified that it intended to sell and export 15.6 million tablets without royalty. Apotex was granted the licence

  • Thailand: In 2006, a compulsory licence was granted to import from India a cheaper generic pharmaceutical with the active compound еfavirenz to treat AIDS, which was patented by Merck. Other compulsory licences followed

  • India: In 2012, the Indian government granted a compulsory license to Natco Pharma to manufacture and distribute Nexavar for a 3 percent of the cost of the original drug patented by Bayer. The decision was ultimately appealed and the licence was revoked.

The proposed bylaws in Ukraine that aim to implement provisions of the law related to compulsory licences may have the public interest in mind, but in effect may influence the presence of innovative companies that invest in research and development and do not want to risk being subjected to a compulsory licence, which would compromise their projected revenues in the jurisdiction. The lobby for the law cited social responsibility and the critical need for medicine in times of epidemics, as well as uncooperative patent owners. It remains to be seen what the outcome of the lawmaking efforts in Ukraine will be. They are meant to protect both the original manufacturer and allow for exceptions for generic drug companies to step in for the benefit of the public in extraordinary circumstances.
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