[Ip-health] Thai Law on Compulsory Licenses

[Sean Flynn]

Thai Law on Government Use Licenses

Sean M. Flynn, American University, Washington College of Law

This note provides a brief explanation of Thailand=92s authority to issue
compulsory licenses under its own law.  It is clear from this review that
the Department of Health is authorized to issue compulsory licenses =93for
public consumption=94 of needed medicines without prior negotiation with th=
e
patent holder over the grounds for the license.  The law suggests that some
effort to negotiate a royalty rate with the patent holder is required, but
ultimately the government is empowered to set the royalty rate, subject to
appeal by the patent holder.

Section 51 of Thailand=92s patent law defines the right of =93any ministry,
bureau or department of the Government,=94 =93by themselves or through othe=
rs,=94
to exercise the rights in any patent where public consumption of the produc=
t
of the patented technology is =93of vital importance=94 to the country.
Specifically, the section states:

[begin quote]

=93In order to carry out any service for public consumption or which is of
vital importance to the defense of the country or for the preservation or
realization of natural resources or the environment or to prevent or reliev=
e
a severe shortage of food, drugs or other consumption items or for any othe=
r
public service, any ministry, bureau or department of the Government may, b=
y
themselves or through others, exercise any right under Section 36 by paying
a royalty to the patentee or his exclusive licensee under paragraph 2 of
Section 48 and shall notify the patentee in writing without delay,
notwithstanding the provisions of Section 46, 47 and 47bis. In the
circumstances under the above paragraph, the ministry or bureau or
department shall submit its offer setting forth the amount of remuneration
and conditions for the exploitation to the Director-General. The royalty
rate shall be as agreed upon by the ministry or bureau or department and th=
e
patentee or his licensee, and the provisions of Section 50 shall apply
mutatis mutandis.=94

[end quote]

Section 51 makes clear that Thailand is well within its rights in granting
patent for the public purchase and use of antiretroviral drugs.

GROUNDS.  Thailand may grant a public use license to =93carry out any servi=
ce
for public consumption=94 or =93to prevent or relieve a severe shortage of =
. . .
drugs or other consumption items or for any other public service.=94

WHO MAY ISSUE A LICENSE.  A public use license may be issued by =93any
ministry, bureau or department of the Government,=94 =93by themselves or th=
rough
others.=94

WHAT PROCEDURES MUST BE FOLLOWED.  The license may be issued (1) =93by payi=
ng
a royalty to the patentee or his exclusive licensee,=94 and (2) =93shall no=
tify
the patentee in writing without delay, notwithstanding the provisions of
Section 46, 47 and 47bis.=94

The exemption from the requirements of Section 46, 47 and 47 bis make clear
that the government is not required to (1) wait until =93the expiration of
three years from the grant of a patent or four years from the date of
application,=94 Section 46, or (2) wait for an application from a party tha=
t
=93has made an effort to obtain a license from the patentee having proposed
conditions and remuneration reasonably sufficient under the circumstances
but unable to reach an agreement within a reasonable period,=94 Section 46
(lack of working/excessive pricing); Section 47/47 bis (patent necessary fo=
r
subsequent invention).

WHO SETS THE ROYALTY.  Section 51 suggests that there should be an effort b=
y
the government to negotiate a royalty rate with the patent holder, after
which effort the ministry requesting the license may set a royalty subject
to appeal by the patent holder.  This is evident from the language in
Section 51 stating that the ministry issuing the patent =93shall submit its
offer setting forth the amount of remuneration and conditions for the
exploitation to the Director-General.=94  The royalty rate shall either be =
(1)
=93as agreed upon by the ministry or bureau or department and the patentee =
or
his licensee,=94 or (2) set in terms of Section 50, which =93shall apply mu=
tatis
mutandis=94 (i.e. with necessary changes).

The reference to Section 50 makes clear that the authorizing ministry has
the right to set a royalty absent agreement with the patent holder, subject
to appeal.  Section 50 discusses the right of the =93Director General=94 to=
 set
a royalty rate.  But this provision applies when the Director General (of
the department of commerce) is the requesting agency.  When another ministr=
y
is requesting the license under the terms of Section 51, then the command t=
o
apply section 51 =93mutates mutandis=94 indicates that the references to th=
e
Director General should be read as applying to the authorizing ministry.
Thus, the applicable language in section 50 states:

=93If no agreement has been reached by the parties within the period
prescribed by the [ministry], the [ministry] shall fix the royalty and
prescribe the conditions and restriction as he deems appropriate subject to
the following requirements: (1) the scope and duration of the license shall
not be more than necessary under the circumstances; (2) the patentee shall
be entitled to further license others; (3) the licensee shall not be
entitled to assign the license to others, except with that part of the
enterprise or goodwill particularly of the part under the license; (4) the
licensing shall be aimed predominantly for the supply of the domestic
market; (5) the remuneration fixed shall be adequate for the circumstances
of the case.=94

RIGHT TO APPEAL.  Section 50 defines a right of appeal where a royalty is
set absent agreement with the patent holder:

=93The decision of the [ministry] made under the first paragraph of the
Section is appealable to the Board within sixty days from the date on which
such decision is received.=94

It is notable that the appeal right is limited to the decision made under
this section, i.e. the setting of the terms of the license of the royalty.
As under U.S. law, the patent holder has no right to appeal the grounds for
the decision to grant a government use license but rather is limited to
contesting the compensation due for the expropriation.

It is further notable that there is no provision in the Thai law authorizin=
g
an injunction prohibiting the government from using the patented invention
pending the outcome of an appeal of the royalty rate.  This is also
consistent with U.S. law governing government use licenses.

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