Compulsory licensing provisions of new industrial property law

The new Industrial Property Law (6769) came in force on January 10 2017. It is in line with the constitutional principle that property rights (or other fundamental rights) may be limited and ruled only by laws enacted by Parliament.

Article 129 of the new Law on Industrial Property Rights lists six circumstances where a compulsory licence may be granted. One of these is set out in Article 129(1)(a), under which a person may demand a compulsory licence on the grounds that the patent is not used by the patent owner. This ground was present in the decree-law, but was limited to circumstances where the patent holder refrained from using the patent for three consecutive years. However, Article 130 of the new law extends the use criteria to hold that even if a patent has been used to some degree, if the use of the patent is not at a level that satisfies national market needs, a compulsory licence may be requested and granted.

'Public interest' is not a pre-condition for granting a compulsory licence under Article 130 of the law, as a compulsory licence in case of public interest is included in Article 132 of the law as a separate situation for a compulsory licence.

Article 130 is potentially one of the most problematic provisions in the new law. No guidance suggests how 'demand in the national market' is to be determined or, even worse, how the level of use will be assessed as satisfying national market needs.

There is great ambiguity as to how the new criteria of satisfying national market demand will be applied by the courts. Most countries that codify compulsory licensing provide for compulsory licensing in the event of “insufficient working” of the patent. It remains to be seen whether this provision will be open to abuse by those favouring the localisation of markets, which is an idea worthy of support when it does not unduly favour local competitors.

Further, in regard to compulsory licensing on grounds of non-use, Article 136 of the new law provides that if the patent holder later grants a commercial contractual licence to another in more favourable conditions than those present in the compulsorily granted licence, the compulsory licence holder may ask for an alteration of the terms and conditions of the licence. These terms and conditions may include remuneration to the patent holder. This again seems to unduly favour the institution of compulsory licensing, the application of which will be clarified through case law. However, Article 136 goes on to state that the licensor may also apply to the court for revocation of the licence where there is abuse or breach of the licence conditions.

In terms of procedure, Article 129(2) provides that the patent holder has one month to file submissions on its position from the date of application of the prospective licence holder to the court. Following this, Article 129(3) provides that the court will render a decision on whether to grant the licence within one month immediately following the filing of submissions. This means that the paramount decision on whether the patent is to be used by its rightful owner in a monopoly allowed by law will be decided by the court with no help from experts or other technical persons in a period of just two months from the date of application to the court. Considering that even summary actions for discovery of evidence or preliminary injunctions take much longer than that and more often than not involve recourse to a three-expert panel, the grant of a licence which results in the destruction of years’ worth of R&D and will force the patent holder to relinquish its monopoly rights in only two months seems unjust. The judge of the intellectual and industrial property court hearing the matter will have a certain specialisation in industrial property matters, but will be unable to ascertain the necessity for the public interest of compulsory licensing. Further, the patent holder will have only one month to file its defence against compulsory licensing, which arguably impedes the right to defence under the Constitution.

The new law confirms some of the reasons for obtaining a compulsory licence, but the following provisions introduce a form of civil procedure not seen before – as even in summary actions there is an exchange of petitions phase – and are almost certainly contrary to the constitutional principle of the right to defence.

This is even more alarming where the remuneration for the licence granted through a court decree is also decided on by the court in the short time allowed by Article 129. It would have been more understandable had the provision stated that the court would decide whether to grant the licence and then turned to technical persons or at least negotiations between the parties to settle at an amount worthy of the licence. The patent holder will lose valuable monopoly rights in the invention and must be allowed an opinion on the value; at the very least, persons competent in the relevant market, patent law and the specific type of invention should be given a say. Unfortunately, the new law gives no say to either of these parties.

One set of circumstances introduced entirely by the new law is contained in Article 129(1)(e), which provides that compulsory licensing may be requested where the patent holder engages in anti-competitive behaviour when making use of its patent rights. Anti-competitive behaviour includes restricting, distorting or eliminating competition, which highlights the fact that intellectual and industrial property rights are contrary to the principles of competition law. On the one hand, competition law aims to sustain healthy competition in the market with equally distributed power that supports equally efficient competitors. On the other hand, industrial property rights aim to grant an inventor a monopoly to provide an incentive for innovation and technology. In return, competition in the market feeds from innovation and technology in the market. Therefore, for many years in Turkey and other countries with similar laws, competition law and intellectual and industrial property laws have achieved a balance according to which, for example, a patent holder has 20 years of monopoly rights, with the market being open to competitors for the same technology after that period. Thus, the incentive to innovate is protected.

Further, Article 129(2) provides that where compulsory licensing is applied for due to a “distortion of competition”, it will not be the intellectual and industrial property courts which decide on whether to grant leave for licensing, but rather the Turkish Competition Authority – an office with no experience in industrial property matters and which is not competent to investigate these issues. Asking the Turkish Competition Authority to destroy monopoly rights by way of compulsory licensing on the grounds of distortion of competition creates an undue balance in favour of the party asking for the compulsory licence. The Turkish Competition Authority will no doubt be inclined towards rejecting the monopoly status established by the patent rights, which stem from years of R&D by patent-holding companies.

The new law is to be welcomed, if only because of the fact that is a legitimate piece of legislation enacted by Parliament and is not contrary to the Constitution. However, it appears that for patent holders, Article 129 on compulsory licensing may be particularly problematic and, to some extent, unfair.