Source: EURLEX
Language: en
Format: md

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| CALL FOR EVIDENCE  FOR AN IMPACT ASSESSMENT | |
| This document aims to inform the public and stakeholders on the Commission's future legislative work so they can provide feedback on the Commission's understanding of the problem and possible solutions, and give us any relevant information that they may have, including on possible impacts of the different options. | |
| Title of the initiative | Compulsory licensing in the EU |
| Lead DG (responsible unit) | GROW C4 – Intangible economy |
| Likely type of initiative | Legislative proposal |
| Indicative timetable | Adoption of the proposal(s) by the Commission by Q1 2023 |
| Additional information | - |
| This document is for information purposes only. It does not prejudge the final decision of the Commission on whether this initiative will be pursued or on its final content. All elements of the initiative described, including its timing, are subject to change. | |

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| A. Political context, problem definition and subsidiarity check |
| Political context |
| As underlined in the Commission’s intellectual property action plan [1](#footnote2)  (‘the IP action plan’), intangible assets are the cornerstones of today’s economy. An effective intellectual property (‘IP’) framework needs to strike a balance between promoting innovation by protecting IP on the one hand and not blocking companies’ access to IP and to the single market on the other.  Of all the types of IP, patents are the most powerful. Patents are key to supporting the EU in its work to build a European health union and in related initiatives such as the new European Health Emergency Preparedness and Response Authority (HERA), and the pharmaceutical strategy for Europe. Patents affect investment decisions across all industrial ecosystems, such as decisions on the roll-out of green and digital technologies. They are therefore one of the most critical tools in the EU’s industrial policy toolkit and will also play a critical role in the upcoming European Chips Act.  Despite the strategic importance of patents, EU patent law is fairly limited and fragmented. EU patent law therefore needs to be recalibrated to boost the resilience of our patent system and support the EU’s twin transition (digital and green). The imminent launch of the unitary patent system also makes this an appropriate time to consider enhancing EU patent law and facilitating access to critical technologies. The Commission is examining possible initiatives regarding three patent-related initiatives. These issues, identified in the IP action plan, will relate to supplementary protection certificates, compulsory licensing and standard-essential patents. They could share common objectives such as: (i) increasing legal certainty and transparency; and (ii) reducing fragmentation and transaction costs.  The COVID-19 pandemic has underscored the importance of having a strong and balanced IP system (to provide the necessary incentives to develop new treatments and vaccines) and a suitable framework (for sharing technologies, know-how and data). It has also triggered many debates, at national, EU and multilateral level, on the need for effective IP tools to ensure proper and global access to essential technologies in a crisis. Close public-private cooperation based on voluntary solutions for sharing the relevant IP and know-how, e.g. licensing or manufacturing agreements, is the fastest and most effective way to develop and scale up the production of critical medicine and medical supplies. However, if voluntary arrangements between right holders, third parties (such as manufacturers) and public authorities fail or are unavailable, the use of last-resort tools, namely compulsory licensing, might be needed. A compulsory licence issued by a government authorises a party other than the patent holder to use a patented invention without the consent of the patent holder. In particular during a crisis, these tools must be effective to make an orderly EU response possible.  As part of the policy response to the COVID-19 pandemic, the IP action plan underlined that ‘the Commission sees the need to ensure that effective systems for issuing compulsory licences are in place’. The Commission would also ‘explore with Member States the possibility of creating an emergency co-ordination mechanism, to be triggered at short notice when Member States consider issuing a compulsory licence’.  The European Parliament, in its resolution of November 2021 on the intellectual property action plan to support the EU’s recovery and resilience (2021/2007(INI)), called on the Commission ‘to analyse and explore possible options for ensuring effectiveness and better coordination of compulsory licensing in the EU’.  The Council conclusions on IP policy of 18 June 2021 confirmed that the EU stood ready to discuss the flexibilities provided for in Articles 31 and 31bis of the World Trade Organisation (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). It also confirmed the need to explore possible IP tools and options to better coordinate the management of cross-border crises.  The EU’s Communication to the WTO General Council on Urgent trade policy responses to the COVID-19 crisis of 4 June 2021 [2](#footnote3)  stressed the importance for each WTO member to ensure that its compulsory licensing legislation was effective and to facilitate such action. The EU confirmed its readiness to engage on clarification and facilitation of use of compulsory licensing as provided for in the TRIPS Agreement. |
| Problem the initiative aims to tackle |
| The TRIPS Agreement, in particular Articles 31, 31bis and the Annex, allows WTO members to authorise the use of patented subject matter without the consent of the patent holders if certain conditions [3](#footnote4)  are met. Under Article 31, an authorisation to use the patented subject matter for domestic purposes may in principle cover patents in all sectors. An authorisation for export purposes (under Article 31bis and the Annex) is limited to the pharmaceutical sector.  Most WTO members have made this authorisation possible in their national systems through a compulsory licence framework. Currently, legislation on compulsory licensing of patents is fragmented in the EU. EU countries regulate their own compulsory licensing schemes [4](#footnote5)  even though many value chains operate across the EU. This can be a source of legal uncertainty, for both right holders and users of IP rights, as the conditions and procedures of such licences (e.g. duration, scope or licence fee setting) can vary from one country to another [5](#footnote6) . In an EU-wide crisis, this can be particularly problematic. A fragmented compulsory licensing framework might not be efficient enough to tackle a crisis (e.g. cross-border production and distribution of complex products such as vaccines).  Furthermore, without EU coordination, EU countries may take different approaches, e.g. some countries could grant compulsory licences for a given product/technology while others may not. This could also affect tackling an EU crisis. No coordination and harmonisation also mean that, even if a crisis only affects one EU country, a unilateral national compulsory licence may not be sufficient if critical products are sourced from other EU countries.  To strengthen the EU’s ability to respond to cross-border health threats, the EU set up HERA. This initiative aims to improve the EU’s response to health crises. It brings together the relevant players in a joint effort to ensure the manufacture, procurement, purchase, stockpiling and equitable distribution of essential medicine and medical supplies. However, an uncoordinated and unilateral use of national compulsory licences could harm EU action to tackle future health emergencies. For instance, if there is a breakdown in voluntary cooperation, the current patchwork of national compulsory licensing systems could affect the possibility to use the production capacity of EU FAB [6](#footnote7)  to supply the entire EU. Any outputs produced by an EU FAB factory under a national compulsory licence could only be used predominantly for domestic supply of the EU country in which the factory is located.  If another global or EU-wide crisis strikes (of a health, environmental, nuclear or industrial nature), the EU would need to rely on the most effective and relevant technologies to overcome it. Unfortunately, the fragmentation and the lack of optimal and coordinated EU compulsory licence rules could slow down rolling out effective solutions to supply critical products.  On the export side, the procedure for granting compulsory licences of patents relating to the manufacture of pharmaceutical products for export purposes to countries with public health problems is set out in Regulation (EC) No 816/2006. This Regulation should be assessed to ensure that it provides the most effective procedure in line with Article 31bis of the TRIPS agreement [7](#footnote8) . |
| Basis for EU action (legal basis and subsidiarity check) |
| Legal basis |
| The planned EU action could be based on Article 114 [8](#footnote9)  and/or 118 [9](#footnote10)  of the Treaty on the Functioning of the EU (TFEU) depending on its scope and the choice of policy tools. Regulation (EC) No 816/2006 on compulsory licensing of medicines for export purposes is based on Articles 95 and 133 of the Treaty establishing the European Community (i.e. Articles 114 and 207 of the TFEU). |
| Practical need for EU action |
| Action at EU level can be justified to ensure the smooth running of the single market for IP rights. For now, national laws and Regulation (EC) No 816/2006 govern compulsory licensing mechanisms in the EU. The planned initiative aims to strengthen the effectiveness of EU compulsory licensing for domestic and export purposes and address the current fragmentation. In particular, the initiative aims to enhance current compulsory licensing schemes in a cross-border crisis by taking pan-European supply chains (cross-border dispersed manufacturing) into account. The initiative will ensure consistency with EU health initiatives and the EU’s objectives of resilience and open strategic autonomy. |
| B. Objectives and policy options |
| The general objective is to create a compulsory licensing system in the EU that would be less fragmented and better-suited for EU-wide crises. Since compulsory licensing may have a significant impact on IP holders, this should remain an exceptional, last-resort measure, applicable in case of failure of voluntary agreements. Working within the bounds of the TRIPs Agreement, the initiative should not lead to higher aggregate burdens or risks for patent holders relative to national regimes, but rather a more convergent, predictable and workable regime in the exceptional cases where recourse to compulsory licensing at EU scale is necessary.    Specific policy objectives:  1.Enhance the efficiency of compulsory licensing in the EU in a crisis.  2.Reduce the fragmentation and improve the coordination of compulsory licensing mechanisms in the EU, including to ensure that they are fit-for-purpose in EU-wide crises and fully consistent with and complementary to other EU initiatives (for instance in the health sector, this would include the EU COVID-19 vaccine strategy, EU COVID-19 therapeutics strategy, HERA, including EU FAB and the pharmaceutical strategy for Europe).  3.Ensure an effective compulsory licensing procedure for exports (Regulation (EC) No 816/2006) in line with Article 31bis of the TRIPS Agreement.    To achieve the policy objectives above, the Commission is considering the options described below.  a)No policy change (baseline scenario).  b)Non-legislative measures (e.g. guidelines and recommendations for granting compulsory licences in times of crisis at national level, improving coordination of how national compulsory licences are issued).  c)Legislative changes:  -Creating an EU coordination mechanism for compulsory licensing in times of crisis with or without harmonising national compulsory licensing laws. This option might apply to all types of crises, including health crises.   -Establishing an “EU-level compulsory licence” for use in a crisis, to be applied in some or all Member States, depending on the circumstances. This option might apply to all crises, including health crises; it could exist in parallel to national regimes for purely national purposes.  -Streamlining compulsory licensing for export purposes. As this concerns Regulation (EC) No 816/2006, this would be limited to pharmaceutical products.  The Commission could also plan a combination of non-legislative and legislative measures. |
| C. Likely impacts |
| The initiative aims to enhance the efficiency of compulsory licensing schemes, in particular to ensure their fitness in tackling crises affecting the EU. This will affect IP right holders, the public and public authorities.  Granting compulsory licences may have a significant impact on the IP right holder concerned: although the right holder is entitled to receive adequate remuneration, this may be much lower than what could have been agreed in different circumstances. Therefore, compulsory licensing should be used cautiously to avoid harming innovation. The envisaged initiative, in the event that it addresses the substantive conditions for grant of compulsory licences, should keep compulsory licences as a solution to be used as a last resort when there is a complete breakdown in voluntary cooperation between right holders, third parties such as manufacturers of products and public authorities.  Granting these licences might also be necessary in the public interest. For example, if there is an urgent need to supply life-saving medicines, one needs very efficient and clear compulsory licensing schemes to avoid delays. By making critical technologies and/or products available when voluntary measures fail in times of crisis, this initiative will have a positive impact on the public.    This initiative is expected to benefit public authorities, as there will be better coordination of compulsory licence granting, making them more effective across the EU in times of crisis for domestic use and for export purposes.    To gauge the impact of this initiative, the Commission will look at all potential costs (including administrative costs) and benefits. A compulsory licence should not cause additional administrative work for businesses. It may impose an opportunity cost on a right holder who will be forced to grant a licence at a set cost. The analysis will consider the best way to calculate a fair remuneration. |
| D. Better regulation instruments |
| Impact assessment |
| The Commission will carry out an impact assessment. This will assess the options mentioned above to support the preparation of this initiative and help decide on the most cost-efficient solution. The Commission should finalise the impact assessment by Q4 2022 and adopt it in Q1 2023.  There is little systematic evidence on compulsory licensing [10](#footnote11)  because it is only intended when all else fails and so has been rarely used. In practice, the mechanism set out under Regulation (EC) No 816/2006 has never been used. A study has been launched to support the impact assessment and collect data through desk research, case studies, interviews, questionnaires and workshops. |
| Consultation strategy |
| The call for evidence aims to gather views, opinions and evidence from all public and private sector stakeholders. The Commission will also conduct a public consultation. Other targeted consultations, bilateral meetings with stakeholders, and workshops (as part of the study) will also be organised. Dedicated meetings with EU countries’ representatives will gather information on national procedures and legal requirements of compulsory licensing.  The Commission will promote these consultation activities through the appropriate channels (including social media, conferences, and direct invitations). A summary report will be published on the consultation page 8 weeks after the consultation closes. A report summarising all consultation results will be published as well. |
| Why we are consulting? |
| The aim of the consultation is to collect views from all stakeholders. It gathers the different grounds and procedures for issuing compulsory licensing in a crisis and should discover bottlenecks and the impact on stakeholders. The consultation supports the preparation of the impact assessment. |
| Target audience |
| Stakeholders for this consultation include: IP right holders, users of IP-protected technologies and products, the health sector (including generic manufacturers, start-ups and patient associations), public authorities, national IP offices, non-profit organisations, civil society representatives, consumer associations, research centres, the European Medicines Agency, IP lawyers. |

:   [(1)](#footnoteref2)
     IP action plan, 
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:   [(2)](#footnoteref3)
     
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    <ropa.eu/doclib/docs/2021/june/tradoc_159605.pdf>
:   [(3)](#footnoteref4)
     Such as the need to make efforts to obtain authorisation from the right holder on reasonable terms and conditions, the requirement of an adequate remuneration, the non-exclusivity nature of the authorised use, etc.
:   [(4)](#footnoteref5)
     Except for export purposes to countries with public health problems – see Regulation (EC) No 816/2006.
:   [(5)](#footnoteref6)
     As described in the European Patent Office’s 
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     ‘
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:   [(6)](#footnoteref7)
     The “EU FAB” project will set up a network of single or multi-user, single or multi-technology emergency response production capacity for vaccine and medicine manufacturing at European level. The project is being set up with the long-term perspective of becoming over time an asset for the future European Health Emergency Preparedness and Response Authority (HERA).
:   [(7)](#footnoteref8)
     Regulation (EC) No 816/2006 of 17 May 2006 on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems.
:   [(8)](#footnoteref9)
     This article gives the EU the power to adopt measures related to the establishment and functioning of the internal market.
:   [(9)](#footnoteref10)
     This article provides a basis to create European intellectual property rights that provide protect intellectual property rights throughout the EU and set up centralised EU arrangements for their authorisation, coordination and supervision.
:   [(10)](#footnoteref11)
     For national compulsory licensing systems, see the European Patent Office’s study ‘
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