Compulsory licensing could disarm patent trolls

But how realistic are compulsory licences?

To our knowledge, no one has ever successfully obtained a compulsory licence in Australia.

Our law makes it very difficult, in fact virtually impossible, to do so, with applicants required to provide evidence which is difficult to obtain.

They must first prove they have tried, without success, to obtain a licence from the patent holder to use the invention in Australia on reasonable terms and conditions.

Next, they must prove that the reasonable requirements of the public for the patented invention have not been met.

Lastly, they must prove that the patent holder has given no satisfactory reason for their failure to use the invention in Australia.

Successfully proving all of this to the court is a tall order.

In one case, the applicant for the compulsory licence could not show that there was a market demand for the invention, and so was refused a licence.

In the face of this example, many feel that the procedure and requirements of obtaining a compulsory licence in Australia are just too difficult.

The uncertainty of a compulsory licence may also discourage those who would have attempted to travel this road.

In one case, the person applying the compulsory licence successfully managed to convince the court that the reasonable needs of the public had not been met because the patentee was not producing the patented invention at all.

However, before the matter had been finalised, the patentee started producing the patented invention, and so the compulsory licence was denied.

A compulsory licence is not a contract; it is a court order, granted for the 'public good' in specific circumstances only.

The court can revoke a compulsory licence at any time when the circumstances which justified it cease to exist.

Importantly, compulsory licences are not free. The patentee is still entitled to be paid for the licence, even though it is granted by the court.

However, the parties will need to come to an agreement on how much the patentee should be paid.

If the parties can't agree, then it will be up to the court to decide what the rate of payment should be, taking into account the economic value of the licence.

A compulsory licence cannot be exclusive. This means the courts can grant more than one compulsory licence for the same patented invention.

A licencee gaining access to the patented invention through a compulsory licence will need to accept that they will not be getting a monopoly to sell the patented invention.

How this affects the Australian business community

If the compulsory licensing provisions are simplified, as it is expected the Productivity Commission will recommend, it may become much easier for IT start-ups to access patented IT inventions for a licence fee at a market rate.

Such changes may also assist healthcare bodies gain access to much-needed medical devices and medicines for lower fees than would normally be payable.

This could open up options for increased benefits under our healthcare system, without alienating those producing the new innovations.

If you are a patent holder, such changes could mean you may need to ensure you are commercialising and/or using the invention you have patented in Australia.

Without using the invention in Australia, or failing to adequately meet the 'reasonable requirements of the public', patent holders could risk their patent becoming the subject of a compulsory licence.

Although still entitled to be paid a licence fee, the patent holder may find their patent reduced in value as a result of the granting of a compulsory licence.

This could in turn affect any licensing agreements the patent holder may wish to enter into in the future.

Dr Vicky Longshaw is a Patent Attorney and Mr Joe Seisdedos is a Senior Associate with Wrays, a national law firm, working in all areas of intellectual property.