Compulsory license

In a compulsory license, a government forces the holder of a patent, copyright, or other exclusive right to grant use to the state or others. Usually, the holder does receive some royalties, either set by law or determined through some form of arbitration.

Copyright
A compulsory copyright license is an exception to copyright law that is usually philosophically justified as an attempt by the government to correct a market failure. As an exception to copyright, another party can exercise one or more of the copyright's exclusive rights without having to obtain the copyright holder's permission (hence "compulsory") but will have to pay a licensing fee.

Some compulsory licenses protect those who wish to use a work for educational or non-commercial purposes. In cases when it is judged too burdensome for scattered or small-scale buyers and sellers to find one another and negotiate a price, governments sometimes issue a compulsory license for the use so that the relative difficulty of obtaining permission for it does not extinguish it. For instance, the copyright law of Canada has a compulsory license scheme for orphan works. This is in contrast to orphan drugs, which often get more protection. In these types of cases, the license must often pass the Berne three-step test.

There are several different compulsory license provisions in United States copyright law. There are compulsory licenses for nondramatic musical compositions, public broadcasting , retransmission by cables systems , subscription digital audio transmission , and nonsubscription digital audio transmission such as Internet radio.

The most commonly known compulsory license is for nondramatic musical compositions. This provision of the Copyright Act allows a person to make a new sound recording of a musical work, if that has been previously distributed to the public, by or under the authority of the copyright owner. There is no requirement that the new recording be identical to the previous work, as the compulsory license includes the privilege of rearranging the work to conform it to the recording artist's interpretation. This does not allow the artist to change the basic melody or fundamental character of the work.

In order to take advantage of this compulsory license the recording artist must provide notice and pay a royalty. The notice must be sent to the copyright owner, or if unable to determine the copyright owner, to the Copyright Office, within thirty days of making the recording, but before distributing physical copies. Failure to provide this notice would constitute copyright infringement. In addition to the notice to the copyright owner, the recording artist must pay a royalty to the copyright owner. This royalty is set by three copyright royalty judges.

Though the compulsory license allows one to make and distribute physical copies of a song for a set royalty, the owner of the copyright in the underlying musical composition can still control public performance of the work or transmission over the radio. Often though, if the underlying musical work is well known, the work can be licensed for public performance through a performance rights organization such as ASCAP or BMI.

The Electronic Frontier Foundation and other advocacy groups have suggested forms of compulsory licensing as one possible solution to the legal conflicts surrounding file sharing. In a typical scenario, those who hold the copyrights for the music traded between network users would be legally barred from suing the infringers. In return, the government would extract payments from listeners, perhaps electronic pay-per-song fees or perhaps sales taxes on peer-to-peer file-sharing software, blank storage media, or even Internet access itself. Assisted by some form of P2P "charts," music industry groups would theoretically distribute these royalties to the rights holders. Others have also suggested that a Compulsory Sampling License would alleviate many of the issues of digital music production that often relies on sampling techniques.

Patents
Many patent law systems provide for the granting of compulsory licenses in a variety of situations. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) sets out specific provisions that shall be followed if a compulsory license is issued, and the requirements of such licenses. All significant Patent systems comply with the requirements of TRIPs.

The principal requirement for the issue of a compulsory licence is that attempts to obtain a licence under reasonable commercial terms must have failed over a reasonable period of time. Specific situations in which compulsory licences may be issued are set out in the legislation of each patent system and vary between systems. Some examples of situations in which a compulsory licence may be granted include lack of working over an extended period in the territory of the patent, inventions funded by the government, failure or inability of a patentee to meet a demand for a patented product and where the refusal to grant a licence leads to the inability to exploit an important technological advance, or to exploit a further patent.

TRIPs also provides that the requirements for a compulsory licence may be waived in certain situations, in particular cases of national emergency or extreme urgency or in cases of public non-commercial use.

An area of fierce debate has been that of drugs for treating serious diseases such as malaria, HIV and AIDS. Such drugs are widely available in the western world and would help to manage the epidemic of these diseases in the third world. However, such drugs are hugely expensive to produce and generally well protected by patents. In order to recover the development costs, the patent holding companies charge prices for the drugs which prevent their purchase by third world countries. Although the national emergency provisions of TRIPs allow the grant of compulsory licences in those third world countries, the countries often lack the technology to be able to manufacture the drugs. However, TRIPs requires that compulsory licences be used to fulfill a local requirement, and so it is not possible to manufacture the drugs overseas and import them to the place of need.

This issue was addressed by the Doha declaration which recognised the problem and required the TRIPs council to find a solution. On 17 May 2006 the European Commission's official journal published Regulation 816/2006, which brings into force the provisions of the Doha declaration. This means that the declaration now has legal effect in the European Union, and also in Canada who implemented it in 2005. The declaration allows compulsory licences to be issued in developed countries for the manufacture of patented drugs, provided they are exported to certain countries (principally, those on the UN's list of least-developed countries and certain other countries having per-capita incomes of less than US$745 a year).

In designing defenses against pandemics or bioterrorism, planners sometimes seek huge supplies of certain drugs. Here, the issue is not so much the cost per dose as the number of doses on the market. Many modern drugs have long production cycles, sometimes as long as a year, so the drug companies must always estimate future demand for their patented drugs and vaccines. The number of victims in a flu pandemic or anthrax attack could exceed any reasonable prediction, and for the original maker to increase production could itself be a lengthy process. The issue of compulsory licences allows the number of manufacturers to be increased, thereby allowing greater volumes of supplies to be manufactured.