IP Expert Talk: Which chances and risks do compulsory licenses entail? (2020)

Contact Johannes Heselberger:
Contact Axel Berger:


Hello everyone. Today, we would like to show you why compulsory licenses in Germany are still a tool with unconsidered chances, respectively, risks, not only for the pharma industries.
And we recently handled one of the few cases in compulsory licensing. One of three in decades.

Why is a compulsory license such an important tool in our system, specifically? That is because we have this mandatory injunction. No discretion to grant an injunction; it has to be granted if it's requested. A compulsory license can offer a legal way out for a defendant.
A compulsory license has two prerequisites: There must be a public interest in this compulsory license, and the license-seeking party must have seriously and unsuccessfully tried over some period of time, the law says, to obtain a license by contract. Since there is very little case law there is much leeway for argumentation.
In particular, because all the cases that have been dealt with by our courts are, to date, pharma cases. So the only public interest that has been discussed so far is patient well-being. But one could well imagine that public interest can also be found in other industries. Take for example the car industry: It could well be argued that there's a public interest in a company being able to manufacture or deliver police cars or ambulances.
Procedurally there are two ways to obtain a compulsory license: There are preliminary injunction proceedings which would provide - if they are successful - the right to use the patent, so the license itself, and then there are main proceedings in which also the license question could be decided and would be decided but also the compensation, the license fee, would be decided upon. If a preliminary injunction request is brought, main proceedings also have to be started.

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The law requires serious and unsuccessful attempts to negotiate a contractual license over an extended period of time. This means, a license-seeking party has
to make its case towards the patentee. It has to say what justifies that license, and what it is willing to pay as a fair compensation. Explaining why that is needed oftentimes requires detailed explanations like, in the pharma field, to provide documents which show indeed that there is a need; and that is also imaginable in other fields. Timely preparation, an offer to exchange information that is a requirement. We see many similarities to the licensing negotiations surrounding the FRAND conditions. If a request for a preliminary injunction for a compulsory license is considered in the context of infringement proceedings, it needs to be considered early on. Probably after realizing that there is little room to argue non-infringement. If, then, the alleged infringer realizes that he cannot obtain a contractual license, he may still be in the position to continue his otherwise patent-infringing acts via a compulsory license. The risk is, of course, that the Federal Patent Court then later finds for a compensation that is higher than what he could have otherwise negotiated for a contractual license. Vice versa, if the Court finds for a lower license fee, for example, that could also be a chance, of course.
From a patentee’s view, it might be better to negotiate a contractual license with a limited scope, with a good price, rather than taking the risk of having a court decide on the scope and on the price of the license. Right.



On the other hand, the compulsory license may also be granted under certain conditions. So it's not that if you are granted a compulsory license, you may use the patent in whatever way you want. Likewise, the compulsory license is not there for all times.
If the public interest falls away, for whatever reason, the compulsory license could be brought to an end. And also, if the patent is invalidated, the compulsory license would come to an end.
Right. So, in summary, the compulsory license in Germany is probably still an underestimated tool. We would expect to see more requests for compulsory licenses in Germany in the future, likely also in other industries, not only pharma. Still, the prerequisites are strict and the requests need to be carefully considered and prepared.
And rebutted, too. And it's not only about pharma cases. Thank you very much!

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