COMPULSORY LICENSING AND GOVERNMENT USE OF PATENTS UNDER PHILIPPINE LAW
All citations are to Republic Act No. 8293 (the “Intellectual Property Code” or “IP Code”) as amended—most notably by R.A. 9502 (2008, the “Universally Accessible Cheaper and Quality Medicines Act”) and R.A. 10372 (2013).
1. Conceptual Overview
| Mechanism | Core Idea | Policy Objective |
|---|---|---|
| Compulsory licence (CL) | A court- or administrative-ordered permission allowing someone other than the patent owner to exploit the invention without the latter’s consent, but with remuneration. | Correct abuses of exclusive rights; secure supply of vital technologies (public health, nat’l security, etc.). |
| Government use | Direct exploitation by, or on behalf of, the State for public, non-commercial purposes, with notice and payment of “reasonable remuneration.” | Enable the State to discharge constitutional duties (public health, national emergency, defense). |
Both draw legitimacy from TRIPS flexibilities (Art. 31) and the Philippine Constitution’s social-justice provisions (Art. XII, XIII).
2. Statutory Bases
- Sections 93-97, IP Code – compulsory licensing.
- Section 98, IP Code – government use; integrates TRIPS Art. 31 (b) waiver of prior negotiation in national emergencies.
- Section 147 (2) – exhaustion/parallel importation (reinforced by R.A. 9502 §5).
- Section 74, IP Code – research exception (often discussed alongside CL).
- R.A. 9502 Implementing Rules (2009) – Part VII on CL & government use, issued by the Department of Health (DOH), Department of Trade & Industry (DTI) and the Intellectual Property Office of the Philippines (IPOPHL).
- IPOPHL Bureau of Legal Affairs (BLA) Rules of Procedure (2021) – Part 5 on CL petitions.
3. Compulsory Licensing in Detail
3.1 Grounds (Sec. 93)
A CL may be sought after four years from the filing date or three years from the grant, whichever is later, except where national emergency or anti-competitive conduct exists (both allow earlier filing). Grounds:
- National emergency or circumstances of extreme urgency.
- Public non-commercial use by the Government (often conflated with Sec. 98 but conceptually distinct because a third party may be authorized).
- Public interest—health, nutrition, environmental protection or anti-competitive practices.
- Failure to work the patent (“local working”) on a commercial scale in the Philippines without legitimate reason.
- Importation in quantities or conditions that fail to meet local demand.
- Refusal to license on reasonable terms where a new invention “cannot be worked without” using the patented invention (dependent patents).
3.2 Who May File (Sec. 95)
Any person, including the Government or a third party, demonstrating the capacity to exploit the invention with “legitimate business intentions.”
3.3 Procedure
| Stage | Key Actor | Timeline / Notes |
|---|---|---|
| Petition filed with IPOPHL-BLA | Petitioner | Must state facts, proposed terms, proof of prior efforts to obtain a voluntary licence, except in national emergency / anti-competitive conduct / gov’t use. |
| Notice & Answer | BLA serves patentee; patentee files verified answer within 30 days. | |
| Pre-trial conference | Issues framed; possibility of mediation (IPOPHL Mediation Office). | |
| Trial / Submission of Position Papers | Documentary evidence generally sufficient; hearings discretionary. | |
| Decision | BLA issues decision within 30 days of case submission; may grant, grant with modifications, or deny CL. | |
| Appeal | Director General of IPOPHL → Court of Appeals → Supreme Court. |
3.4 Scope & Terms (Sec. 96)
- Non-exclusive and non-assignable (except with the part of the business actually exploiting the licence).
- Field-of-use restrictions and duration specified.
- Reasonable remuneration based on “economic value of the authorization,” generally a royalty of 0.5 %–4 % of net sales, adjusted to circumstances.
- Predominant supply to local market—export allowed only under TRIPS Art. 31-bis (e.g., export of generic ARVs to low-income states).
3.5 Revocation & Variation
- Patentee or licensee may seek variation after 3 years or on substantial change of circumstances.
- Termination once ground ceases to exist and no substantial legitimate interest subsists.
4. Government Use (Sec. 98)
| Requirement | Default Rule | Exceptions |
|---|---|---|
| Prior negotiation with patentee | Required | Waived in national emergency or public non-commercial use; patentee receives notice “as soon as reasonably practicable.” |
| Scope | For “public non-commercial” purposes (defense, pandemic response, public hospitals) or to remedy anti-competitive conduct. | Commercial sale to public allowed only if primarily to address public health needs (R.A. 9502 §2). |
| Remuneration | Same standard as CL—reasonable, adequate, taking into account the economic value. | May be fixed by DOH & DTI jointly. |
| Administration | Implementing agency (e.g., DOH, Department of National Defense) issues a “special order” to a contractor or uses own facilities; must report to IPOPHL. | Judicial review available under Rule 65 (certiorari). |
5. Interaction with Other Doctrines
- Parallel Importation (Sec. 147 (2)/(3)) – permits import of cheaper genuine products once first sold anywhere in the world, thereby complementing CL/government use.
- Data Exclusivity (Sec. 72.1) – DOH may rely on innovator’s regulatory data when issuing market authorization to a CL holder or gov’t contractor.
- Bolar Exception (Sec. 72.4) – allows generics to prepare marketing applications before patent expiry; vital so that CL products launch immediately once licence issues.
- Competition Law (R.A. 10667) – PCC may recommend CL if abuse of dominance over patented technology constrains competition.
6. Key Jurisprudence & Administrative Practice
| Case / Proceeding | Holding / Significance |
|---|---|
| “United Laboratories Petition” (IPOPHL BLA-CL-2008-01) | First CL petition filed after R.A. 9502; settled, but IPOPHL recognized standing of generic companies to seek CL for anti-competitive pricing. |
| “Tamiflu Limited Working” (2009 DOH importation) | Government invoked Sec. 98 during the H1N1 pandemic; negotiated discounted supply, demonstrating de facto leverage without formal licence. |
| In re “Ritonavir/Lopinavir” Consultations (2012-2013) | DOH threatened CL, leading to voluntary licence and price reduction; illustrates “shadow of the CL” bargaining power. |
| Bayer v. House of Representatives (G.R. No. 163553, 2004) | Supreme Court obiter recognised legislature’s prerogative to enact broader CL schemes for public health. |
| Nat’l Defence Procurement, Night-Vision Devices (classified) | DND invoked Sec. 98 for limited import of patented optics; demonstrates defence-oriented government use. |
7. Practical Considerations
7.1 For Patent Owners
- Maintain evidence of working (local manufacture or sufficient import volumes).
- Engage in good-faith licensing negotiations; document reasonable royalty offers.
- Monitor DOH “reference price” list—prices >50 % of reference draw scrutiny.
7.2 For Potential Licensees
- Demonstrate technical capacity: GMP compliance for drugs, ISO for devices.
- Prepare cost-based royalty proposal referencing UNDP / WHO benchmarks.
- Leverage civil-society support—NGOs may file amicus briefs bolstering public-interest grounds.
7.3 For Government Agencies
- Keep transparency records: justification memo, notice to patentee, royalty calculation.
- Use competitive bidding for third-party manufacturing to ensure efficiency.
8. International Alignment
| TRIPS Art. | Philippine Implementation |
|---|---|
| 31(b) – prior negotiation waiver | Sec. 98(1) (national emergency or public non-commercial use) |
| 31(h) – adequate remuneration | Secs. 96 & 98(4) |
| 31(f) – predominantly for domestic market | Sec. 96, but overridden for export under TRIPS Art. 31-bis; enabled by R.A. 9502 §6 |
| 31bis – export by CL | DOH & DTI Joint Administrative Order No. 2008-1 |
9. Policy Debates & Reform Trends
- Lowering the “local working” threshold vs. encouraging technology transfer through higher de facto barriers.
- Whether to shift CL jurisdiction from IPOPHL to the Philippine Competition Commission for anti-trust grounds.
- Streamlining government use during pandemics—proposed bills seek an automatic licence trigger upon WHO PHEIC declaration.
- Open licensing for green tech – House Bill No. 4227 would add climate-related emergencies as a separate CL ground.
10. Conclusion
Compulsory licensing and government use in the Philippines embody a calibrated equilibrium: they preserve the constitutional mandate to protect public welfare while upholding international IP commitments. The statutory framework—fortified by R.A. 9502—offers robust, TRIPS-compatible levers that government and private actors can deploy to temper monopolistic excesses, ensure access to lifesaving technologies, and foster a competitive innovation ecosystem.
This overview is for scholarly discussion and does not constitute legal advice. For specific transactions or disputes, consult qualified Philippine counsel.