What compulsory licensing really means
Compulsory licensing isn’t about stealing patents. It’s about letting a government step in when a life-saving drug is too expensive, and no one is making it affordable. Imagine a cancer medicine priced at $10,000 a month. The company that holds the patent made it with government-funded research. But they won’t lower the price. So the government says: compulsory licensing - someone else can make it, pay a fair fee, and sell it for $500. That’s not piracy. It’s public health law in action.
This tool has been around since the 1880s, but it only became widely used in the 2000s when HIV drugs were unaffordable in Africa and Asia. The World Trade Organization’s TRIPS Agreement in 1994 made it legal - but only under strict rules. Countries can override a patent if there’s a national emergency, if the patent holder isn’t making the drug available, or if the public’s needs aren’t being met. And they must pay the patent owner. Not a penny less.
How it works in the U.S., India, and Brazil
The U.S. has the power to use compulsory licensing, but rarely does. Under Title 28, U.S.C. § 1498, the federal government can use any patented invention - say, a military tech or a vaccine - without the company’s permission. But the company can sue for compensation in the Court of Federal Claims. Between 1945 and 2020, there were only 10 cases. Most were for defense tech, never drugs.
Then there’s India. Since 2005, India has issued 22 compulsory licenses - all for cancer drugs. In 2012, Natco Pharma got the green light to make a generic version of Bayer’s Nexavar, a kidney cancer drug that cost $5,500 a month. Natco sold it for $175. The patent holder sued. The case dragged on for eight years. But the license stood. That’s the power of a country that sees health as a right, not a profit line.
Brazil took a similar path. In 2007, it issued a license for Merck’s efavirenz, an HIV drug. The price dropped from $1.55 per tablet to $0.48. That saved the government $100 million a year. Brazil didn’t wait for negotiations. They used the law to force action. And it worked.
When the world needed it most: COVID-19
In early 2020, as the pandemic spread, countries scrambled. Vaccines were locked behind patents. Companies held exclusive rights. Prices were high. Canada, Germany, Israel, and 37 other nations prepared to issue compulsory licenses. Some, like Spain, passed emergency laws letting them bypass patent holders entirely.
But few actually used them. Why? Because the companies - Pfizer, Moderna, Johnson & Johnson - started offering low-cost deals to poorer countries. The threat of a compulsory license worked. Just the possibility forced them to negotiate. That’s the quiet power of this tool. You don’t always have to use it. Sometimes, just saying you will, changes everything.
Then came the WTO’s 2022 waiver. For the first time, countries could produce and export COVID vaccines without patent permission - until 2027. But only 12 facilities in 8 countries actually started making them. Why? Because setting up a vaccine plant takes years, money, and expertise. The law was there. The capacity wasn’t.
Who benefits - and who loses
Generic drug makers win. Teva Pharmaceutical made $3.2 billion extra between 2015 and 2020 from compulsory licenses. Patients win. In low-income countries, the price of first-line HIV drugs fell 92% because of these licenses. Governments win. They stop spending billions on overpriced medicines and can treat more people.
But the pharmaceutical industry says it’s a disaster. They claim compulsory licensing kills innovation. A 2018 study in the Journal of Health Economics found that countries with active licensing saw 15-20% less R&D investment. That sounds scary. But here’s the catch: most of that R&D is funded by public money. The U.S. government spent over $100 billion on biomedical research from 2000 to 2020. Private companies often just take that science, patent it, and charge 100x the cost to produce.
And what about the threat of trade sanctions? The U.S. has listed countries like India and Brazil on its “Priority Watch List” for using compulsory licenses. But no country has ever been punished for it. Not one. The law is clear: TRIPS allows it. The WTO says it’s legal. The U.S. can’t ignore that without losing credibility.
The hidden barriers
Just because a law exists doesn’t mean it’s easy to use. Most low- and middle-income countries can’t even issue a compulsory license. Why? They don’t have lawyers who understand patent law. They don’t have courts that can handle complex IP cases. The World Health Organization found that 60% of these countries lack the technical capacity to do it right.
Even in rich countries, it’s slow. In the U.S., getting compensation under Section 1498 takes an average of 2.7 years. In India, the process takes 18 to 24 months. And the patent holder can appeal. That’s why most licenses happen after years of pressure - not in emergencies.
Another problem: the requirement to first try to negotiate a voluntary license. TRIPS says you must try. But in a pandemic? That’s like asking a drowning person to fill out a form before you throw them a life raft. Thailand and Brazil waived this rule. India did too. And it saved lives.
What’s next for compulsory licensing
The WHO is now drafting a Pandemic Treaty. One draft article says: when a global health emergency is declared, all essential medicines and vaccines should be automatically licensed. No negotiation. No delays. Just production.
The European Union is pushing for a new rule: if a company doesn’t offer fair licensing terms within 30 days of a request, the government can skip to compulsory licensing. That’s a game-changer. It flips the script. Instead of waiting for companies to act, governments set the clock.
Experts predict a 40% rise in compulsory licensing over the next five years - not just for drugs, but for climate tech, clean energy tools, and medical devices. Why? Because the next crisis won’t be just a virus. It could be antibiotic resistance, a heatwave that kills thousands, or a food shortage caused by failing crops. Patents shouldn’t stand in the way of survival.
Why this matters to you
You might think: ‘I live in the U.S. This doesn’t affect me.’ But it does. If your insurance company refuses to cover a new cancer drug because it’s too expensive, and the company won’t lower the price - what’s stopping the government from stepping in? Nothing. The law allows it. The precedent exists.
And if you ever need a drug that’s priced out of reach - whether it’s for diabetes, HIV, or a rare disease - knowing this tool exists gives you power. It means someone, somewhere, can make it cheaper. And that’s not just legal. It’s moral.
Is compulsory licensing legal under international law?
Yes. The TRIPS Agreement, part of the World Trade Organization rules, explicitly allows countries to issue compulsory licenses for public health reasons. The 2001 Doha Declaration confirmed this right. No country has ever been legally punished for using it. The U.S., EU, and other developed nations all agreed to these rules.
Does compulsory licensing stop innovation?
Not really. Studies show that most pharmaceutical R&D is publicly funded - often by U.S. and European taxpayers. Companies patent the results and charge high prices. Compulsory licensing doesn’t kill innovation - it just stops companies from charging 100x the cost to produce. Countries that use it, like India and Brazil, still attract drug research partnerships. The threat of licensing often leads to lower prices without needing to issue one.
Can any company apply for a compulsory license?
No. Only the government can authorize it. A private company or NGO can request it, but the state must issue the license. In most cases, the government then lets a generic manufacturer produce the drug. The applicant must prove they can make it, distribute it, and pay fair compensation to the patent holder.
How much do patent holders get paid?
It varies. In the U.S., courts use the ‘Georgia-Pacific factors’ - 15 criteria including royalty rates for similar licenses. In India, the formula is 6% of net sales. Brazil and Thailand set prices based on production cost plus a small profit margin. The key is ‘adequate remuneration’ - not market price, not monopoly profit. Just enough to be fair.
Why don’t more countries use compulsory licensing?
Three reasons: fear of trade pressure, lack of legal expertise, and political influence from pharmaceutical companies. Many governments don’t have lawyers who know how to navigate patent law. Others are afraid of being labeled ‘anti-innovation’ by the U.S. or EU. But as more countries succeed - and as global health threats grow - that’s changing.
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