Deal on patent rules exception to ensure the supply of critical products

This article is brought to you in association with the European Parliament.

• New “compulsory licensing” regime agreed by EU co-legislators 
• Emergency products covered by patents to be immediately available to EU countries 
• Rights-holders to receive adequate compensation 

The new rules will ensure that the EU will be able to secure the necessary supply of crisis-relevant products and technologies that are otherwise protected by patents.

European Parliament and EU government negotiators reached an agreement on new legislation ensuring availability of crisis-relevant products, such as vaccines or chips, during emergencies. According to the new bill, the EU will be able to issue special permission for the production of patent-protected goods during cross-border emergencies, without needing the authorisation of the rights-holder. This would allow the immediate production, for example, of vaccines or therapeutics also by other companies than the one holding the patent.

This special permission, known as compulsory license, can be issued by the European Commission in clearly defined emergencies, such as a cross-border health crisis or internal market emergency, with specified scope, territorial coverage and duration. It would be used only as a last resort and only in cases where a voluntary agreement between rights-holder and licensee could not be reached. The new law will not apply to defence-related products. In the process of launching the compulsory license procedure, the Commission will have to identify all related intellectual property rights and their holders.

Right to compensation and fines for breaches

The rights-holder would also be entitled to appropriate remuneration for the use of their patent by the licensee. The amount and timeframe for payment would be determined by the Commission and specified in the compulsory license. The regulation does not require the disclosure of trade secrets.

The new rules also clarify obligations for licensees, e.g. not to produce more products than a set maximum amount and to label the products manufactured under compulsory license. Should a licensee breach the agreed obligations, such as producing more products than allowed or exporting them from the EU, the Commission can impose a fine not exceeding €300,000 and in the case of small or medium-sized enterprise not exceeding €50,000.

Consulting advisory body, rights-holders and licensees

A competent advisory body, or if such an organisation does not exist, an ad-hoc advisory body will issue its non-binding opinion on the need to grant an EU compulsory license. Rights-holders and licensees will also be consulted during the process and notified of the termination or expiry of a compulsory license.

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Following the negotiations, rapporteur of the Legal Affairs Committee Adrián Vázquez Lázara (EPP, ES) said: “I am proud to see this regulation adopted. It strikes a crucial balance between protecting intellectual property rights and ensuring that, in times of crisis, essential technologies and products can be made available swiftly across the Union. This framework enhances our collective preparedness and reinforces the EU’s commitment to both innovation and public welfare.”

Next steps

Once formally approved by the Parliament as a whole and the member states, the regulation will enter into force one day after its publication in the Official Journal.

Background

The European Commission presented its proposal on compulsory licensing in April 2023, as part of the EU patent package focusing on completion of the Single Market for patents. It was its reaction to the European Parliament resolution of November 2021, where it called on the Commission to analyse the possibility of compulsory licencing at the EU level.