Abstract
I. INTRODUCTION
For decades, compulsory licenses on patents had been lying dormant in Germany.
Only in 2016, they started to move into the focus of attention when the German Federal Patent Court (Bundespatentgericht) granted a compulsory license on a patent on short track, i.e., in preliminary injunction proceedings, and when the second instance, the German Federal Court of Justice (Bundesgerichtshof), confirmed that decision in 2017. The two decisions set a milestone and mark German patent law history. Ever since, the mere possibility of adopting compulsory license measures has provided a strong incentive for the conclusion of agreements between patent owners and potential licensees.
In this article, we will, starting with the statutory basis, outline the developments in German case law. In this regard, we will take a look back at the history, analyze the landmark decisions taken in 2016 and 2017, and end with the most recent case law dating from June 2019. Whenever we refer to “compulsory licenses,” we refer to compulsory licenses on patents. A compulsory license on a patent has different requirements than the FRAND 1 /compulsory license defense based on competition law, which we will not address in this article. 2
II. STATUTORY BASIS
The instrument of compulsory licenses is internationally acknowledged and can be found in international treaties such as the Paris Convention for the Protection of Industrial Property 3 and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), 4 as well as in a separate European regulation. 5 The European regulation establishes a procedure for the grant of compulsory licenses in relation to patents and supplementary protection certificates concerning the manufacture and sale of pharmaceutical products, when such products are intended for export to eligible importing countries in need of such products in order to address public health problems. It is directly applicable in all member states of the European Union.
German patent law provides for the grant of a compulsory license in Section 24, paragraph 1, of the German Patent Act (GPA). 6
Section 24, paragraph 1 GPA reads as follows:
The non-exclusive authorization to commercially use an invention shall be granted by the Federal Patent Court in an individual case in accordance with the following provisions (compulsory license) where 1. a license seeker has, within a reasonable period of time, unsuccessfully attempted to obtain permission from the proprietor of the patent to use the invention on reasonable commercial terms and conditions, and 2. the public interest calls for the grant of a compulsory license.
Thus, there are two requirements that need to be met:
the license seeker must have unsuccessfully tried to negotiate a license agreement on reasonable terms within a reasonable period of time with the patent owner, and there must be specific circumstances in the form of a public interest which calls for the grant of a compulsory license.
The second requirement touches upon the very basic tension in the pharmaceutical market: the monopoly rights conferred by patents to the respective patent owners and the constitutionally guaranteed right of ownership on the one hand versus the (urgent) public interest in health care on the other hand.
Section 24, paragraph 1 GPA not only applies to German national patents, but also to German parts of European patents in accordance with the European Patent Convention (EPC). 7 According to Article 2, paragraph 2 EPC, a European patent shall, in each of the contracting states for which it is granted, have the effect of and be subject to the same conditions as a national patent granted by that state, unless otherwise provided in the EPC. According to Article 74 EPC, the same applies to European patent applications. As the EPC does not provide for compulsory licenses, the GPA applies to German parts of European patents and patent applications.
Proceedings for the grant of a compulsory license correspond to the proceedings for revocation of a patent or invalidity of a supplementary protection certificate (see Section 81 GPA): the competent first instance courts are the Nullity Senates of the German Federal Patent Court (GFPC), the second and final instance is the German Federal Court of Justice (GFCJ). Pursuant to Section 85 GPA, compulsory licenses may also be granted in preliminary proceedings. In order to obtain a preliminary order, the applicant has to show and substantiate that the requirements under Section 24 GPA are fulfilled and there is an urgent need, in the public interest, for the immediate grant of a compulsory license.
III. GERMAN CASE LAW
After decades of insignificance of compulsory licenses, as recently as 2016, the GFPC handed down a landmark decision where a compulsory license was granted on short track, i.e., in “preliminary injunction proceedings,” for a human immunodeficiency virus (HIV) drug. The decision was affirmed both on appeal by the GFCJ and in proceedings on the merits by the GFPC again.
Recently, the two courts were faced with another request to grant a compulsory license in preliminary injunction proceedings, this time for a high cholesterol drug. The request, however, was dismissed and the dismissal confirmed by the GFCJ. In detail:
1. Case law prior to 2016
Prior to 2016, no single compulsory license was ever successfully requested in the history of the GFPC and, from what is publicly known, very few compulsory license proceedings had been initiated at all.
The last publicly available decision dates back to 1991. In its decision as of June 7, 1991, the GFPC had granted a compulsory license with regard to the active ingredient interferon-gamma. 8 The GFPC had assumed that there was a public interest. Upon the appeal of the patent owner, the GFCJ, however, denied the public interest and lifted the GFPC's first instance decision. 9 It especially stated that the rights and interests of patent owners can only be overruled in special circumstances where the interest of the general public calls for use of the patented technology by the license seeker.
2. The landmark case Isentress (active ingredient: raltegravir)
2.1. Basic facts of the case
The applicants of the case were European subsidiaries belonging to the group of companies of the U.S.-American Merck & Co. (“Merck” referring to one, several, or all companies of the group, if not specifically identified). In Germany, Merck sells the medicinal product Isentress in four different dosage forms. The medicinal product contains raltegravir, which is, in the course of an antiviral therapy against HIV, designed to inhibit the enzyme integrase and thus counteract the proliferation of the virus. The medicinal product was launched in 2007 and has been generating worldwide annual sales of approximately USD 1.5 billion since 2012.
The defendant, Shionogi & Company Ltd. (“Shionogi”), is the holder of the European patent EP 1 422 218, which is registered at the German Patent and Trademark Office under No. DE 602 42 459 (“patent in suit 1”). The patent in suit 1 claims priority from three Japanese patent applications dating back to 2001 and 2002. It has been maintained in opposition proceedings by the European Patent Office (EPO) with limited claims. At the point in time of the decision of the GFPC, the Board of Appeal had not yet decided on the appeal filed by Merck.
By letter dated June 3, 2014, Shionogi informed the Japanese subsidiary of Merck about the existence of a Japanese patent belonging to the patent family of the patent in suit 1. Shionogi stated that the medicinal product Isentress fell within the scope of that patent and that it would be, under certain conditions, prepared to grant a license. Shionogi's letter was answered by the Senior Vice President & Assistant General Counsel of the U.S.-American Merck by letter dated June 30, 2014. In his letter, he stated that the Japanese patent would be examined and asked to have any future correspondence with him.
Both Shionogi and the U.S.-American Merck expressed their interest in a worldwide agreement. During the negotiations, which lasted more than a year, Shionogi submitted two quantified offers which were based on sales of Isentress. In both offers, it proposed a lump sum payment for the period prior to the entry into force of an agreement and, depending on the country and status of each patent, percentage royalties on sales of Isentress. Merck repeatedly pointed to the opposition proceedings pending before the EPO and concerns about the disclosure and the validity of the patent in suit 1. Merck made a counteroffer which provided for a worldwide one-off payment. Merck upheld its offer until the negotiations were terminated, as apparently the parties could not agree on the amount of the royalty fee.
By writ of action as of August 17, 2015, Shionogi commenced infringement proceedings based on the patent in suit 1 at the District Court Düsseldorf 10 against Merck. Shionogi requested Merck to refrain from the use of raltegravir in the manufacture of a pharmaceutical for use as an integrase inhibitor for the prevention or treatment of a viral disease and its commercialization. Shionogi further requested information and the rendering of an account. The District Court Düsseldorf later stayed the proceedings.
By writ of action as of January 5, 2016, Merck filed a request for the grant of a compulsory license at the GFPC (proceedings on the merits). Shionogi opposed the request. On June 7, 2016, Merck filed an additional request in preliminary injunction proceedings.
2.2. Landmark decisions of the German Federal Patent Court and the German Federal Court of Justice in preliminary injunction proceedings
In its decision as of August 31, 2016, the GFPC decided preliminary injunction proceedings in favor of Merck. It found that Merck had sufficiently substantiated all of the requirements pursuant to Sections 24, para. 1, and 85 GPA. It held that Merck is preliminarily permitted to use the invention protected by the German part of the patent in suit 1 in such a way that Merck is, until the decision in the proceedings on the merits, preliminarily allowed to offer, put on the market, import, or own for the purpose of offering or putting on the market in Germany, the medicinal product Isentress for the treatment of HIV/AIDS patients in the four dosage forms as already available on the German market. 11 The GFCJ confirmed the GFPC's decision in its decision as of July 11, 2017. 12
In the following, we will mainly refer to the GFCJ's decision, as the GFCJ is the second and final instance, and as it confirmed and in parts further elaborated on certain aspects of the case. 13
2.2.1. Requirement of an “unsuccessful attempt of the license seeker to obtain a license on reasonable terms within a reasonable period of time”
Although it seems to be fairly easy to fulfill the first requirement—an unsuccessful attempt of the license seeker to obtain a license on reasonable terms within a reasonable period of time—as is very often the case, the devil is in the details. It seems to be quite obvious that not every offer can suffice, as offers that are clearly not serious and/or are only used to reach the stage of applying for a compulsory license must be excluded. The crucial question is, however, what kind of offer will suffice.
Rather astonishing at first glance, the GFCJ pointed out that the required efforts do not necessarily have to be made prior to filing the action for the issuance of a compulsory license or the respective request in preliminary injunction proceedings. It is sufficient that the offer has been made at the close of the hearing. However, as the attempt must have extended over a reasonable period of time, it follows that it is not sufficient when a license seeker only during the proceedings, “at the last minute,” declares its willingness to pay an appropriate license fee. Rather, it must have attempted, over a certain period of time, in a manner appropriate to the specific situation, to reach an agreement with the patent owner on the grant of a license. What period of time and what measures are required are matters of the individual case.
In the case at hand, the negotiations failed because the parties had considerably dissenting views on the amount of royalty fees. The GFCJ stated that the GFPC correctly reached the conclusion that the pre-procedural conduct of Merck (still) met the requirements under Section 24, paragraph 1, number 1 GPA with regard to the special circumstances of the dispute at hand.
The GFPC further stated that the offer made by Merck hardly justified any expectation that an agreement would be reached prior to the final conclusion of the opposition proceedings at the EPO. Still, according to the GFPC, it was correct to find that the conduct of Merck's side was not mere specious negotiating tactics. The parties' diverging notions regarding the total amount of license fees to be paid could not be seen as inappropriate in the case at hand, because the question of whether the patent in suit 1 would prove to be valid could not be answered with sufficient confidence even after the decision of the opposition division of the EPO.
Shionogi's offer entailed that Merck should withdraw all opposition claims against the patent in suit 1. The licensing agreement it therefore proposed was to serve simultaneously to set aside the dispute over the validity of the patent in suit 1. Considering this starting point, it was not considered unreasonable on the part of Merck to allow their expectations concerning the outcome of the opposition procedure or a possible subsequent nullity proceeding to influence their pricing notions. Their prospects of success may well have been narrowed to a certain extent by the partial upholding of the patent in suit 1 by the opposition division. And yet the decision did not preclude a ruling more favorable to them by the Technical Board of Appeal. That the standpoint of Merck was not hopeless was confirmed in the further course of events by the likewise contested decision of the High Court of Justice of England and Wales, which dismissed an infringement claim based on the patent in suit 1 due to a lack of patentability and inadequate disclosure of the invention. 14
With this state of play, Merck was considered not to be required to further accommodate Shionogi's ideas on pricing. Shionogi of course assumed that the patent in suit 1 would retain its validity and wanted, by concluding a licensing agreement on the proposed terms, Merck to lose its possibility to further contest the validity of the patent in suit 1. Though the parties could have taken account of this interest by agreeing on a licensing fee calculated on the assumption of a continued validity but keeping open Merck's option to further contest validity, a willingness of Shionogi to draft such an agreement had not been evident from its offers either.
Both the GFPC and the GFCJ stated that it is not required to present a FRAND (fair, reasonable, nondiscriminatory) offer.
2.2.2. Requirement of the “public interest in the grant of a compulsory license”
The GFCJ pointed out that the GFPC rightly considered it credible that the public interest in the case at hand called for the grant of a compulsory license. The GFCJ stated that whether the public interest calls for the grant of a compulsory license depends upon the circumstances of the individual case. It said that the legal term “public interest” used in Section 24, paragraph 1, number 2, cannot be paraphrased in a generally valid manner. The question of whether a public interest requires the grant of a compulsory license must instead be answered by weighing all circumstances that are relevant in the individual case and the interests concerned. In doing so, it must be kept in mind that a patent confers on the patent owner an exclusive right, the exercise of which the patent owner alone may decide on. The public interest could therefore only be affected when special circumstances arise that outweigh the unlimited recognition of the exclusive right and the interests of the patent owner, because the interests of the public necessitate the exercise of the patent by the license seeker.
The GFCJ further stated that in applying these principles, a public interest prescribing the grant of a compulsory license can be confirmed when a medicinal product used to treat serious illnesses displays therapeutic characteristics that the drugs available on the market do not possess, or not in the same degree, or when its use avoids undesirable side effects that must be accepted with the administration of the other therapeutic drugs. A compulsory license cannot, on the other hand, be granted when the public interest can be satisfied by substituting other, essentially identical drugs.
As the facts before the court had shown that no adequate alternatives—at least not for some patient groups, e.g., infants and children less than 12 years of age—for raltegravir were available, the balance of interest resulted in a prevailing public interest to grant the compulsory license.
2.2.3. Legal reason for the decisions (enforceability of the patent in suit 1)
As mentioned above, the District Court Düsseldorf had stayed the infringement proceedings. Therefore, Shionogi had argued that it was not in the position to enforce the patent in suit 1 anyway, and that there was therefore no reason for a preliminary injunction, i.e., no sufficient interest in a preliminary granted right to use the invention. The GFCJ did not accept this line of argument. Instead, it stated that the fact that Shionogi could not enforce its cease-and-desist claim until the opposition decision had been handed down by the EPO due to the stay of proceedings in the infringement case did not preclude the issue of a preliminary injunction.
2.2.4. Urgency
Since the proceedings concerned a preliminary right to use the invention, the GFPC had to decide whether there was sufficient urgency in the present case that would allow granting such a right in preliminary injunction proceedings. The GFCJ concurred with the GFPC stating that the requirements for a preliminary ruling were met. It is of particular importance that the GFPC and the GFCJ held the opinion that while the behavior of license seekers and possible delays in filing the request need to be taken into account, the ordinary rules on urgency in civil proceedings, particularly in patent and unfair competition proceedings, do not apply. The general rules of civil preliminary injunction proceedings in the German Code of Civil Procedure 15 allow a preliminary decision only if the party seeking the preliminary injunction may otherwise risk losing its right. In preliminary injunction proceedings regarding the right to use an invention based on Section 85 GPA, the decisive factor is the prevailing public interest. Thus, while the court may not ignore the behavior of the license seeker, it must primarily bear in mind that that it is not granting the right for the benefit of the license seeker but for the benefit of the general interest.
2.3. Decision in the proceedings on the merits
On November 21, 2017, the GFPC took its decision in the proceedings on the merits. 16 As outlined above, the patent in suit 1 had been under opposition while the preliminary injunction proceedings took place. Subsequently, the patent in suit 1 was revoked in its entirety by the Boards of Appeal of the EPO. 17 Thereupon, Merck formally declared the matter to be completely settled, and requested a ruling that there is no need to adjudicate. Shionogi only partly joined that request. As regards the fixing of royalties and the rendering of accounts, it did not consider the matter to be settled.
The GFPC found that the matter was not fully settled after the revocation of the patent in suit 1 as Merck had made use of the compulsory license. It explicitly stated that only with the revocation has the compulsory license become obsolete and thus, a royalty claim has arisen. In accordance with the circumstances of the case, the GFPC considered a license fee of four percent of the net sales price of the medicinal products covered by the preliminary injunction to be appropriate and commensurate with the economic value of the compulsory license.
3. The subsequent case Praluent (active ingredient: alirocumab)
3.1. The facts of the case
The applicants in the proceedings, several group companies of the French Sanofi group (“Sanofi” referring to one, several, or all companies of the group, if not specifically identified), sell the medicinal product Praluent in Germany. Praluent contains the active ingredient alirocumab, which is a human monoclonal antibody that belongs to a novel class of anti-cholesterol drugs known as PCSK9 inhibitors (PCSK9 meaning proprotein convertase subtilisin kexin type 9).
PCSK9 is a protein that targets low-density lipoprotein receptors (LDLRs) for degradation and thereby reduces the liver's ability to remove LDL-C, or “bad” cholesterol, from the blood. If PCSK9 is blocked, more LDLRs are recycled and are present on the surface of cells to remove LDL-particles from the extracellular fluid. Therefore, blocking PCSK9 can lower blood LDL-particle concentrations.
The defendant in the proceedings, Amgen, is owner of the European patent EP 2 215 124, which is registered at the German Patent and Trademark Office under No. DE 60 2008 042 526 (“patent in suit 2”). The patent relates to antigen binding proteins to proprotein convertase subtilisin kexin type 9. The patent in suit 2 was opposed. At the time of the decision of the GFPC, the opposition division of the EPO had not yet taken its decision (but see below).
Amgen markets the medicinal product Repatha which contains the active ingredient evolocumab. Evolocumab is also a human monoclonal antibody that inhibits PCSK9.
In 2016, Sanofi was sued for patent infringement by Amgen in proceedings at the District Court Düsseldorf. 18 On July 12, 2018, Sanofi brought an action for the granting of a compulsory license before the GFPC and, at the same time, requested a preliminary order under Section 85 GPA. The District Court Düsseldorf first stayed the proceedings, but reopened them after the opposition division of the EPO issued its preliminary opinion, which was that the patent in suit 2 is valid.
On November 30, 2018, the EPO issued its decision on the validity of the patent in suit 2, upholding the patent in an amended form. On the day of the announcement of the decision, Sanofi issued a statement saying that it intends to appeal the EPO's decision.
Meanwhile, the District Court Düsseldorf found that Praluent infringes the patent in suit 2, and Amgen has enforced the injunction prohibiting the manufacturing, sale, and marketing of Praluent by Sanofi (and Regeneron) in Germany. From the information publicly available, Sanofi has appealed the District Court Düsseldorf's decision.
3.2. The decision of the German Federal Patent Court
In its decision as of September 6, 2018, the GFPC dismissed the request for a preliminary compulsory license. 19
3.2.1. Requirement of an “unsuccessful attempt of the license seeker to obtain a license on reasonable terms within a reasonable period of time”
The GFPC held that Sanofi had not shown that it had, over a reasonable period of time, tried to obtain a license to use the patented invention on reasonable, customary commercial terms. According to the factual findings of the GFPC, an offer to conclude a license agreement was only made three weeks before Sanofi applied for a compulsory license on July 12, 2018.
The GFPC stated that this in itself is a very short period of time which could only be considered sufficient in special cases, such as companies affiliated with companies or business partnerships which have already concluded unproblematic licensing agreements in the past with essentially the same conditions. Even if one sees the period of time until the hearing on September 6, 2018, and thus licensing efforts lasting more than two months, the case at hand was not considered to be such a special case. On the contrary, the GFPC found that the circumstances of the case at hand argue that the license offer must be regarded as having been submitted “in the last minute” which is not sufficient. The circumstances at hand were, e.g., that due to a number of legal proceedings with regard to the patent in suit 2 and parallel patent rights pending between the parties in several countries, it could not be expected that an agreement would be reached within only a couple of weeks. Further, the royalty rate offered was considered to be very low and the tone of the offer to be rather rough, both which were considered to contribute to the expectation that an agreement was, if at all, not to be reached within weeks or even a few months. Finally, the GFPC took into account the fact that a study that was used by Sanofi to show public interest in a compulsory license was already issued in March 2018. After all, the license offer made was considered to be an insufficient “last minute request.”
3.2.2. Requirement of the “public interest in the grant of a compulsory license”
The GFPC concluded that Sanofi did not provide sufficient evidence on the public interest in the availability of Praluent.
The GFPC stated that it already had doubts as to whether Praluent has the therapeutic effects claimed by Sanofi and whether it can significantly reduce the overall mortality (compared to the placebo group). The GFPC analyzed in detail a study submitted by Sanofi (the ODYSSEY-OUTCOMES study), but in the end did not come to a conclusion in this regard. It rather assumed that even if Praluent had the claimed therapeutic effects and even if it could significantly reduce the overall mortality, Sanofi did not provide sufficient evidence on the fact that Praluent (alirocumab) has therapeutic effects that Repatha (evolocumab) does not possess or does not possess to the same extent, so that in the case of a non-availability of Praluent, the public interest would not be met by a substantially equivalent substitute. Sanofi, however, bore the burden of proof regarding the superiority and unique therapeutic benefits of Praluent. Inter alia, the mere possibility that Praluent could be administered in lower doses as compared to other available medicinal products was not considered sufficient to fulfill the requirement of a “public interest” and thus, to warrant the grant of a compulsory license.
3.3. The decision of the German Federal Court of Justice
The GFCJ has upheld the ruling of the GFPC in its decision as of June 4, 2019. 20
The GFCJ saw, like the GFPC, insufficient efforts by Sanofi for a reasonable period to conclude a license agreement and to obtain a license. It stressed that which efforts are required under the GPA and over what period they must extend is a matter of the individual case. It stated that in the case at hand, Sanofi did not announce its interest in a license until too close to the proceedings and only offered a very low license rate. Additionally, the GFCJ stated that Sanofi had, until the end of the proceedings, not even replied to a letter from Amgen which did not reject the granting of the license.
The GFCJ also denied a public interest for a compulsory license. The main reason for this was the lack of evidence that Praluent offers tangible therapeutic benefits over Amgen's medicinal product Repatha. Praluent and Repatha were, according to the findings of the GFCJ, based on the same mechanism. This promotes cholesterol reduction and enables a significant reduction in cholesterol levels, which, according to the results of the studies that have been carried out, reduces the risk of a major cardiovascular event such as coronary heart disease, heart attack, stroke, or unstable angina by about 15%. Since this significant pharmacological effect is achieved by both antibodies, it alone can not justify the public interest in the requested compulsory license.
Like the GFPC, the GFCJ did not consider it credible that the administration of Praluent reduces the mortality rate with hypercholesterolemic patients treated with this medicinal product. According to the results of the Praluent clinical study, fewer patients in the Praluent group have suffered cardiac arrhythmia or died of cardiovascular disease than in the control group. However, according to accepted biostatistical principles, these results are statistically just as insignificant as the different (not differentiated by death cause) total numbers of deaths, but may also be due to chance.
The GFPC saw no other indication that Praluent, in contrast to Repatha, despite its consistent mechanism and effectiveness in reducing the risk of a major cardiovascular event—which in turn increases the risk of another fatal infarct or stroke—reduces the mortality rate of patients treated with a PCSK9 inhibitor.
Finally, the Federal Court of Justice did not consider it credible that the possibility of dosing Praluent lower than Repatha requires the granting of a compulsory license.
4. Comment and outlook
Following the landmark decisions in the Isentress case, compulsory licenses have become a strategic legal tool to work with. License seekers now may refer to a reliable precedent and may seriously consider requesting the grant of a compulsory license, even in preliminary injunction proceedings. However, as can be seen from the most recent case, Praluent, the legal requirements as specified by the GFPC and the GFCJ are difficult to meet and are likely to be met only in special constellations, e.g., when a life-saving drug is concerned. Nevertheless, the mere possibility of obtaining a compulsory license will in the future influence negotiations between patent owners and license seekers especially in the pharma sector. Generally, it is likely to enhance the willingness to conclude agreements, as both parties of such negotiations will keep in mind the advantages and disadvantages of a compulsory license and the uncertainties of compulsory license proceedings. The license seeker must know that if negotiations fail, it has to demonstrate consistent efforts in obtaining a license, preferably along with a rejection of the negotiations by the patent owner. The amount of the offered royalty rate should not be overly important as long as the license seeker did not provide an upper limit and is content to bear the risk that the offered rate is later found to be unreasonably low. More importantly, the license seeker must know that, in compulsory licensing proceedings, it bears the burden of proof for the public interest. This means that it is crucial for the medicinal product in question to provide a tangible benefit over other available medicinal products and treatment options. The patent owner, on the other hand, is, inter alia, faced with the risk of having to let a potential competitor use its patented invention in a broad scope and with no (negotiable) limitations, e.g., as to patient groups.
As it stands today, it is very likely that the European patent with unitary effect 21 and the Unitary Patent Court (UPC) will not “go live,” as the German government most recently stated that the UK's departure from the European Union plays an “important role” in the further implementation process of the UPC, and as the factual and legal implication of the Brexit need to be discussed on a European level. However, if the UPC miraculously enters into force, the guidelines developed by the German courts are likely to be followed by the UPC as far as the German territory is concerned as the UPC regime does not comprise any rules on compulsory licenses.
IV. KEY ISSUES TO TAKE AWAY AND KEEP IN MIND
The German Patent Act provides for the granting of compulsory licenses on patents.
German jurisprudence has been restrictive to grant compulsory licenses on patents. As can be seen from recent case law, however, the compulsory license on patents is much more than a theoretical legal institution.
The two crucial requirements for obtaining a compulsory license are: (i) the license seeker must have tried unsuccessfully to negotiate a license agreement on reasonable terms within a reasonable period of time with the patent owner, and (ii) there must be specific circumstances in the form of a public interest which call for the grant of a compulsory license.
The public interest can outweigh the patent owner's interest to exclusively exploit a patent if, e.g., alternative drugs are not as effective or entail serious side effects.
In particularly urgent cases, the compulsory license can be granted in preliminary injunction proceedings.
The principles of competition law developed with regard to FRAND terms do not apply to the compulsory license on patents pursuant to the German Patent Act.
Against the background of recent case law, patent owners will take into account the risk of a compulsory license in licensing negotiations.
License seekers will understand that the option of obtaining a compulsory license is not merely an idle threat. It can be used for their advantage in order to receive licenses for crucial patents if they can provide sufficient evidence on the public interest.