COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on compulsory licensing for crisis management and amending Regulation (EC) 816/2006
Date: 2023-04-27
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: coronavirus disease, crisis management, epidemic, export monitoring, health aid, intellectual property, pharmaceutical product, rule under emergency powers, security of supply

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  EN 

   EUROPEAN COMMISSION  Brussels, 27.4.2023  SWD(2023) 122 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT  Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on compulsory licensing for crisis management and amending Regulation (EC) 816/2006       {COM(2023) 224 final} - {SEC(2023) 173 final} - {SWD(2023) 120 final} - {SWD(2023) 121 final}  
 
 
Executive summary 

Impact assessment on compulsory licensing for crisis management. 

Why? What is the problem being addressed?  

A. Need for action 

In the context of the COVID-19 crisis the role of intellectual property (IP) rights in providing 
access to vital products was debated. Although voices were raised to waive IP rights, the EU 
considered that another solution was already available, should voluntary agreements fail.  

The TRIPS Agreement provides the possibility to issue, in certain circumstances, compulsory 
licensing. A compulsory licence  of patents  is  an authorisation  granted by a government  to  a 
party other than the patent holder to use a patented invention without the consent of the patent 
holder.  
The Commission IP action plan1 of 2020 underlined ‘the need to ensure that effective systems 
for  issuing  compulsory  licences  are  in  place’.  In  its  resolution  of  November  20212,  the 
European Parliament called on the Commission ‘to analyse and explore possible options for 
ensuring effectiveness and better coordination of compulsory licensing in the EU’.  
And the Council3 confirmed that the EU stood ready to discuss the flexibilities of compulsory 
licensing  for  the  domestic  market  and  export  purposes.  In  parallel,  the  Commission  tabled 
proposals to ensure the EU’s resilience and to guarantee well-functioning supply chains in the 
single  market  and  abroad4.  Against  the  backdrop  of  the  increasing  completion  of  the  single 
market for patents through the upcoming launch of the unitary patent, the initiative described 
in this document situates itself at the intersection between the different EU crisis instruments 
and the international obligations and discussions on IP rights and compulsory licensing. 

Current  EU  compulsory  licensing  rules  are  characterised  by  inadequate  territorial  coverage 
and uncoordinated national procedures and decision-making. This is especially problematic in 
view of the cross-border value chains increasingly predominant in the EU single market.  

This results from: 

(1)  Divergent  national  schemes  on  compulsory  licensing:  compulsory  licensing  is  allowed 
under different procedures and conditions in different EU member countries; 

(2)  Inadequate  territorial  reach  of  compulsory  licensing:  despite  the  flexibility  that  exists  at 
international level, compulsory licensing in the EU is designed to exclusively supply national 
territories, meaning that there is currently no single market and no free movement of goods for 
compulsory licence products; 

(3) No dedicated forums to deal with compulsory licensing that could bolster EU resilience in 
times  of  crisis:  the  current  compulsory  licensing  system  that  could  complement  and  support 
the  EU’s  ability  to  tackle  crises  appears  disconnected  from  EU  crisis  instruments.  

1 IP action plan, COM(2020) 760 final, 25.11.2020. 
2 The resolution on the IP action plan to support the EU’s recovery and resilience (2021/2007(INI)). 
3 Council conclusions of 18 June 2021.  
4  Proposal  for  a  regulation  of  the  European  Parliament  and  of  the  Council  establishing  a  Single  Market 
emergency instrument (SMEI) and repealing Council Regulation No (EC) 2679/98, Regulation (EU) 2022/2371 
of  23  November  2022  on  serious  cross-border  threats  to  health  and  repealing  Decision  No  1082/2013/EU  and 
Council Regulation (EU) 2022/2372 of 24 October 2022 on a framework of measures for ensuring the supply of 
crisis-relevant medical countermeasures in the event of a public health emergency at Union level  

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In  addition,  there  is  no  coordination  at  EU  level  should  several  EU  countries  wish  to 
coordinate  their  measures  for  national  compulsory  licensing.  Consequently,  it  would  be 
difficult  for  an  EU  country  with  manufacturing  capacities  to  produce  goods  to  help  another 
EU  country  or  to  issue  a  compulsory  licensing  covering  a  manufacturing  process  spanning 
several EU countries.  

What is this initiative expected to achieve?  

The  general  objective  is  to  enable  the  EU  to  respond  to  crisis  situations in  a  timely  manner 
using the full potential of the single market and to ensure that in a crisis, critical products and 
components  can  be  made  available  across  EU  countries  and  supplied  without  delay  to  EU 
citizens and firms or even to non-EU countries.  

In connection with the general objectives and with the problems identified earlier, 3 specific 
objectives have been defined: 

(1)  Improve  the  key  features  of  compulsory  licensing,  such  as  the  trigger,  scope  and 
conditions  for  compulsory  licensing,  and  make  compulsory  licensing  a  more  consistent  tool 
for tackling a crisis in the EU. 

(2) Ensure that the territorial reach of a compulsory licence, including for export purposes, can 
accommodate the reality of cross-border value chains operating in the single market. 

(3)  Support  EU  resilience  by  improving  coordination,  streamlining  decision  making  and 
allowing compulsory licences to better complement EU action in crises, including for export 
purposes  to  non-EU  countries.  This  objective  would  also  aim  to  ensure  suitable  consistency 
between (national) compulsory licensing schemes and EU crisis instruments.   

What is the value added of action at the EU level?  

Action at EU level is justified to ensure the smooth functioning of the single market in crisis 
situations.  

Currently,  EU  countries  can  only  act  nationally  (i.e.  compulsory  licensing  for  their  own 
territory). This might suffice for national crises. However, it will not be optimal when a crisis 
has a cross-border dimension – and this is highly probable due to prevalence of supply chains 
that span multiple countries in the single market. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a 
preferred choice or not? Why?  

  Option 0: No policy change. 

  Option  1:  Recommendation  on  compulsory  licensing  for  crisis  management.  This 
would  identify  (i)  good  national  practices  for  compulsory  licensing  as  part  of  crisis 
management and (ii) good coordination practices, with a view to encourage their use in all 
EU countries. 

  Option  2:  Harmonisation  of  national  laws  on  compulsory  licensing  for  crisis 
management. The legislative initiative would align national laws as regards the grounds, 
scope, procedure, and conditions for granting a compulsory licence for crisis management. 
The  compulsory  licensing  would  remain  in  the  remit  of  the  EU  country  and  have  a 
predominantly national effect. 

  Option 3: Harmonisation plus a binding EU-level measure on compulsory licensing for 

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crisis management. Compulsory licensing could be triggered:  

(i) by an EU-level decision activating crisis mode or declaring an emergency under an 
existing EU crisis instrument (e.g. activation of the emergency mode under the Single 
Market Emergency Instrument (SMEI)) 

(ii) on a request made to the Commission by more than one EU country, in the event of a 
crisis affecting multiple countries. The Commission, assisted by the relevant advisory 
body, would adopt an activation measure requiring one or more EU countries to issue a 
compulsory licence. This option would lead to several national compulsory licences, each 
applicable to the territory of several EU countries or to the whole EU 

  Option  4:  EU-level  compulsory 

licensing  to  complement  existing  EU  crisis 
instruments:  The  triggers  would  be  the  same  as  under  option  3.  However,  the 
Commission,  assisted  by  the  relevant  advisory  body,  would  adopt  an  activation  measure 
granting  a  compulsory  licensing.  This  option  would  lead  to  the  issuance,  by  the 
Commission,  of  a  single  compulsory  licence,  with  its  own  procedure  and  conditions  and 
applicable to the territory of several EU countries or the whole EU. 

It  appears  that  Option  4  would  be  the  most  effective  and  efficient  way  of  achieving  the 
objectives of this initiative.  

This option would create a single procedure to grant an EU-level compulsory licence with the 
features  required  to  tackle  a  crisis.  The  Commission  activation  measure  would  ensure  that 
conditions are the same across the EU and would avoid national discrepancies likely to slow 
down or prevent an efficient compulsory licensing scheme from tackling cross-border crises.  

This  single  compulsory  licence  would  be  applicable  in  all  relevant  territories,  therefore 
covering cross-border situations. This would be the case for both the EU market and for export 
purposes. Consistency with EU crisis instruments would be ensured by the possibility to use 
them to trigger the licence procedure and by reference to the (advisory) bodies set-up by those 
instruments to discuss an EU-level compulsory licence.  

Who supports which option?  

The results of the public consultation show that a large majority (82%, N=61) of respondents 
consider that public authorities should be entitled to allow production of critical goods through 
a compulsory licence.  

Respondents  are  usually  less  in  favour  of  a  decision-making  role  for  European  institutions 
(28%, N= 21) compared to a coordinating role (36%, N=27). This can be explained by the fact 
that  businesses  and  industry  representatives  expressed  low  support  in  this  respect,  whereas 
they were the dominant group of respondents to the consultation (54% of all participants).  

That being said, the option of granting a compulsory licence at EU level is generally deemed 
more positive by stakeholders as regards the EU’s ability to  tackle crises (35%, N=26) than 
the granting of compulsory licences at national level (respectively, 11%, N=8).  

Stark contrast exists among stakeholders with again low support for the option among industry 
representatives: a majority (around 50%) of companies and business associations consider that 
the  impact  would  be  negative.  In  contrast,  no  respondent  in  other  categories  considers  the 
impact  would  be  negative.  A  large  majority  (65%,  N=22)  rates  it  positive  (4%  thinks  the 
impact would be neutral and the rest did not reply). 

C. Impacts of the preferred option 

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What are the benefits of the preferred option (if any, otherwise main ones)?  

The  preferred  option  would  fully  address  the  three  identified  problems  and  objectives.  It 
would: 

(i)  entitle  the  Commission  to  directly  grant  a  compulsory  licence  and  specify  the  conditions 
under  which  this  licence  is  granted.  These  conditions  would  be  the  same  for  all  territories 
where  the  licence  applies.  This  would  ensure  optimal  clarity  and  consistency  as  regards  the 
conditions for the licence. 

(ii)  provide  an  optimal  solution  as  regards  the  territorial  scope  of  the  licence.  One  single 
compulsory licence would cover all EU countries affected by the crisis and all EU countries 
with the relevant manufacturing capacities. 

(iii) complement other EU crisis instruments: the activation of a crisis mode by an EU crisis 
instrument, such as SMEI, can be the trigger leading to the granting of a compulsory licence. 
Relying on the existing advisory body when the trigger originates in an EU crisis instrument 
also ensures optimal consistency with EU crisis instruments.  

Under  the  preferred  option,  patent  owners  would  benefit  from  fewer  costs  and  less  legal 
uncertainty, as negotiations would be limited to participation in a single EU-level procedure.  

Potential licensees would benefit from the centralised procedure and the wide territorial scope 
of the licence, bringing economies of scale.  

Better  sharing  of  information  would  also  allow  a  reduction  of  costs  for  EU  countries  as  it 
could help identify best practice.  

On  enforcement  costs,  EU  countries  would  benefit  from  the  centralised  procedure,  as  costs 
linked to the negotiations with patent owners and manufacturers would be  incurred solely at 
EU level.  

EU  citizens  would  greatly  benefit  from  the  preferred  option  as  it  would  improve  the  EU’s 
ability to  issue an effective and efficient  compulsory licence for the whole EU, including in 
the event of cross-border supply chain disruptions.  

Non-EU countries would also benefit as the option would provide the possibility to rely on a 
compulsory licence covering a cross-border supply chain. 

Table 1: Positive impacts on stakeholders in the event of a cross-border crisis - Option 4 compared to the baseline 

Patent owners 

(+ +) Lower costs of negotiations, due to a single procedure at EU level instead of multiple procedures in each EU 
country concerned. 

(+ +) More legal certainty (e.g. clarity on what level of remuneration may be expected), due to the single procedure at 
EU level instead of multiple procedures in each country concerned.  

Manufacturers – 
potential licensees 

(+ +) Lower costs of negotiations, due to the single procedure at EU level. 

(+) Lower costs of adapting manufacturing facilities to the production of the item(s) covered by the licence, due to 
economies of scale, if EU-level compulsory licensing leads to wider geographical scope. 

EU countries 

(+ + +) Significantly lower costs of running the compulsory licensing procedure (no negotiations with the patent 
holders or manufacturers), as EU countries will only implement a single decision made at EU level  

(+) Better exchange of information about availabilities of product(s), in case of local shortages or cross-border value 
chain disruptions.  

(+) Better decision-making and cooperation in the context of compulsory licencing for export to non-EU countries.  

The general public 
(EU citizens) 

(+ + +) Significantly lower risk of delays or unavailability of critical products during crisis, as rules are consistent 
across all EU countries. 

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Non-EU countries 

(+ + +) Increased legal certainty and administrative savings when accessing critical goods in case of cross-border 
supply chains, due to direct coordination at EU level. 

Note: (0) neutral impact; (+) minor positive impact; (++) positive impact; (+++) significant positive impact; (-) minor negative impact; (- -) 
negative impact; (- - -) significant negative impact 

What are the costs of the preferred option (if any, otherwise main ones)?  

Patent owners could face an incremental loss of control of their patent rights if the impact of 
the preferred option broadened the geographical scope of the compulsory licence, as compared 
to the current situation with a thicket of national licences.  

This  greater  territorial  reach  could  also  be  produced  by  extending  compulsory  licensing  for 
export to a non-EU country. EU countries would need to bear limited adjustment costs as the 
preferred option would provide an EU-level compulsory licence, through a regulation, on top 
of existing national legislation.  

They  would  also  face  some  enforcement  costs  in  the  event  of  a  crisis,  linked  to  the 
transparency obligation. 

Table 2: Negative impacts on stakeholders in the event of a cross-border crisis - Option 4 compared to the baseline 

Patent owners 

(- -) In the event of a broader geographical scope for the licence (= wider loss of control over patent rights). 

EU countries 

(-) Cost of participating in the advisory committee assisting the single contact point. 

(-) Cost of reporting to the European Commission on the implemented compulsory licence. 

Note: (0) neutral impact; (+) minor positive impact; (++) positive impact; (+++) significant positive impact; (-) minor negative impact; (- -) 
negative impact; (- - -) significant negative impact 

How will businesses, SMEs and micro-enterprises be affected?  

Impacts  that  may  materialise  as  a  result  of  the  preferred  option  will  mainly  concern  patent 
holders,  but  the  number  of  small/medium-sized  enterprises  that  own  IP  rights  in  the  EU  is 
relatively low.  

Furthermore,  apart  from  the  fact  that  compulsory  licensing  is  an  extremely  low  probability 
event,  it  can  be  assumed  that  small  enterprises  are  more  prone  to  enter  into  voluntary 
agreements than larger firms, hence there could be no need to use the compulsory licensing at 
all.  

Furthermore, small/medium-sized enterprises are typically licensees, not licensors.  

Will there be significant impacts on national budgets and administrations?  

EU countries would bear limited adjustments costs as the preferred option would provide an 
EU-level compulsory licence, through a regulation, on top of existing national legislation. 

They would  face some  enforcement costs in  the event  of a crisis, linked to  the transparency 
obligation. However, the benefits of a centralised procedure at EU level would outweigh these 
costs. 

Will there be other significant impacts?  

There are no other significant impacts expected. 

D. Follow-up 

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When will the policy be reviewed?  

The  first  evaluation  report  should  be  done  5  years  after  the  granting  of  the  first  EU-level 
compulsory licence. 

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