Manuel Durães Rocha
Abreu:advogados, Lisbon
Manuel.rocha@abreuadvogados.com

Mariana Almeida Costa
Abreu:advogados, Lisbon
​​​​​​​mariana.a.costa@abreuadvogados.com

Introduction

While warning signs of a potential new health pandemic first surfaced in December 2019, in less than a year, several effective vaccines had commenced to mass-production.

The evolution and adaptation demonstrated by both the scientific community and the global pharmaceutical industry in the face of Covid-19 has been extraordinary, but unfortunately the production capacity needed to achieve group immunity from coronavirus is still some way off.

As a result, the issue of compulsory licensing has arisen around the world, as part of a possible solution to increase the production and distribution of new vaccines.

Patents and compulsory licensing

A patent is granted by a state or an international institution. It grants the patentee with exclusive rights to economically exploit the patented product on a temporary basis (normally for a period of 20 years). This is counted from the date of application on the official publication of the patent for public disclosure of the invention.

This temporary monopoly is granted to reward the inventor, to reimburse and boost investments into the product, and to finance and foster future new inventions.

A compulsory licence is a legal mechanism under which a patentee may be required to grant a licence for the exploitation of the patented invention by third parties. A compulsory licence may only be granted in exceptional circumstances, as defined by law.

The compulsory licence may have as a beneficiary either a public or private entity and it normally relates to issues of public interest.

The compulsory licence balances a patentee’s private interests with wider societal interests. There is a duality of constitutionally protected values here: if there is public interest in compulsory licensing, then the defence of private interests through the patent system may be compromised.

In Portugal industrial property rights have constitutional protection. Expropriation and compulsory licences can clash with several constitutional provisions, including the rights not to be dispossessed of intangible property and freedom of private economic initiative, among others.

However, a compulsory licence is constitutionally permissible, insofar as it provides the mechanism for balancing the patent regime against other equally protected interests; namely, the right to health in exceptional and defined circumstances.

Conditions for a compulsory licence

A compulsory licence must comply with several legal grounds and guarantees, which are defined in favour of the owner of the industrial property right. The constitutional principle of proportionality provides guidance when it comes to the restriction of fundamental rights.

Portugal’s intellectual property law establishes the right of expropriation of patents based on public interest upon payment of fair compensation to the patentee. Despite this legal provision, there are no cases of expropriation of patents in Portugal.

A compulsory licence may be applicable under three circumstances:

1. lack or insufficiency of exploitation of the patented invention in quality or quantity that implies serious damage to the economic or technological development of the country;
2. public interest cases; and
3. cases of dependence among patents.

All three circumstances require proof of prior attempt to obtain a voluntary licence via negotiation between the patentee and the interested party. The law demands that the interested party demonstrate and prove that it has made reasonable efforts to obtain a contractual licence in fair commercial conditions and that such efforts have not been successful in a reasonable timeframe. The grant of a compulsory licence further demands payment of an adequate royalty to the patentee.

The IP law also demands that the potential beneficiary of the compulsory licence demonstrate and prove why the original patent has not been exploited in an efficient and adequate way, which is a complicated and difficult process. Along with these complexities in the procedure to obtain a compulsory licence, there is also the difficulty in establishing what monetary amount constitutes a fair royalty to the patentee.

The scope and duration of the compulsory licence is limited to the purpose for which it was authorised. As a compulsory licence should always be appropriate and proportional to the situation in question, it may be terminated or adjusted when it no longer makes sense in the context in which it was originally issued. The compulsory licence must not restrict the patent right beyond what is deemed necessary.

Portuguese IP law accepts the grant of contractual licences in the case of pending patents. However, if a patent is not granted at the end of the proceedings, such licences lapse. The law specifically accepts contractual licensing of patent applications but this does not automatically mean the extension of such acceptance to compulsory licences.

The very specific legal limitation of a patent right consisting in a compulsory licence clearly contained in the law is not specifically established in the case of pending patents; therefore, one can argue that it is not possible. On the contrary, one can always argue cui licet quod est plus, licet utique quod est minus.

Who’s in charge

The Portuguese Patent and Trademark Office (PPTO) is responsible for granting or refusing compulsory licences. The patentee has the right to oppose the request for a compulsory  licence.

Prior to the PPTO’s final decision, each party has the right to appoint an expert who, in cooperation with the PPTO-appointed expert, shall determine the conditions of the compulsory licence and the amount of compensation payable to the patentee. The PPTO’s decision may be appealed.

In the specific case of compulsory licences based on public interest reasons, it is for the government minister responsible for the matter at stake to decide whether to grant or refuse the licence.

Conclusion

International cooperation is necessary to combat the Covid-19 pandemic successfully, and innovation and patent rights in particular play a crucial role.

The patent system provides an incentive for research and development institutions and pharmaceutical industries to continue researching, financing and producing vaccines and other medicines.

However, legal restrictions and their scope must be clearly defined and are only acceptable in cases where the patent system cannot demonstrably respond in an effective manner.

Denying or severely restricting patent protection would result in legislative uncertainty and a disincentive to undertake scientific research and development, which could have serious long-term consequences.