A compulsory licence is a licence granted by an administrative or judicial body to a third party to exploit an invention without the authorization of the patent holder. This type of licence is commonly referred to as a non-voluntary licence connoting the lack of consent by the patent holder. The TRIPS rules on compulsory licensing are contained in article 31. The concept of compulsory licensing itself, however, has a long history. One of the earliest legal instruments to incorporate the concept was the United Kingdom (UK) Statute of Monopolies of 1623.11 At the international level, compulsory licences are recognized and provided for in the Paris Convention of 1883.12 Indeed, by 1994, when TRIPS was adopted, compulsory licensing provisions had become a typical feature of patent laws around the world.13
11 Correa (1999a), p. 1.
12 See article 5A(2) of the Paris Convention which provides that,
"Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licences to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent, for example failure to work:"
13 Correa (1999a), p.2.
Article 31 of TRIPS lists detailed conditions which must be complied with when a WTO Member chooses to use compulsory licensing. These include the need to grant licences on a case-by-case basis, evidence of unsuccessful prior request for a voluntary license, non-exclusivity of the licence and the requirement for compensation. There are also conditions governing the termination of licences and restrictions on export and on assignment of licences to third parties. Notwithstanding these conditions, the Agreement still leaves considerable room for flexibility in legislating on compulsory licences.
Compulsory licensing as a policy mechanism can be used to address a number of situations including, among others:
• The high prices of medicines.
• Anti-competitive practices by pharmaceutical companies.
• Failure by pharmaceutical patent holders sufficiently to supply the market with needed medicines.
• Emergency public health situations.
• The need for establishing a pharmaceutical industrial base.