Compulsory licensing enables a competent government authority to license the use of an invention to a third party or government agency without the consent of the patent-holder. The patent-holder, however, retains intellectual property rights and “shall be paid adequate remuneration” according to the circumstances of the case (Article 31). In the pharmaceutical sector compulsory licences have been used to stimulate price-lowering competition and to ensure availability of needed medicines. Most developed countries and many developing countries now provide for compulsory licensing through national legislation.

A comprehensive patent regime should include adequate provision for the granting of compulsory licences. Grounds for compulsory licensing may include public interest, problems linked with national emergencies such as epidemics, public non-commercial use, or anti-competitive practices (Article 31). Whether or not compulsory licences are issued, national legislation which provides for compulsory licensing allows governments to provide the medicine in the case of abuse of rights by the patent-holder, or commercial non-availability. Any such use should be authorized predominantly for the supply of the domestic market of the Member authorizing such use (Article 31f).

Compulsory licences must be granted on a non-exclusive basis. Since the TRIPS Agreement provides for non-discrimination between locally produced and imported products (Article 27/1), a compulsory licence may be granted for importation to satisfy local needs (Article 31).