The amendments to Patent Act in Taiwan were passed on November 29, 2011 and will become effective in January 2013. Many significant revisions have been made in the Act. However, compulsory licensing of patent, among other things, undoubtedly is one of the most important issues dealt with in the revision.

Compulsory licensing of patent aims to prevent abuse of patents, hindering of the implementation and use of the invention, and promoting the development of science and technology. From as early as 1944, compulsory licensing of patent has been progulmated in the old Patent Act. In 1997, for the purpose of obtaining membership of the World Trade Organization (WTO), the Taiwan Intellectual Property Office (TIPO, then called the Bureau of Central Standard), on the basis of Article 31(b) of Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), amended the old compulsory licensing of patent provisions to meet the requirementsof TRIPs, which read as “The Patent Authorities may, upon request by the applicant, grant a compulsory licensing to the applicant to practice the patent when in the case of national emergency, a non-profit-seeking use of a patent for the enhancement of public welfare, or when an applicant has failed to reach a licensing agreement with the patentee within a considerable period of time in spite of reasonable commercial terms and conditions already proposed to the patentee,” and “when the patentee has committed unfair competition as confirmed through a judicial judgment or by the Fair Trade Commission of the Executive Yuan.” (Article 76, old Patent Act)

However, the provisions "when an applicant has failed to reach a licensing agreement with the patentee within a considerable period of time ……, the Patent Authorities may grant a compulsory licensing to the applicant” in Article 76-1 have caused a great deal discussion among the public since promulgation, especially when the TIPO adopted the controversial provisions to the landmark case of CD-R compulsory licensing between Gigastorage Company (Gigastorage) and Philips Company (Philips).

In that case, Gigastorage, a Taiwan-based disc manufacturer, after failing to reach a disc royalty agreement with Philips, applied for compulsory licensing of patent with the TIPO based on the provisions of Article 76-1 of the old Patent Act. TIPO permitted the application of Gigastorage and in July 2004 granted Gigastorage to use five patented CD-R manufacturing methods owned by Philips. Philips in Taiwan sued to the Administrative High Court to seek an administrative remedy against the decision of the TIPO. Meanwhile, Philips appealed to the European Commission (EC) asserting that TIPO’s decision has constituted a barrier to trade. As a result of the investigation conducted by the EC, it was held that the provisions of compulsory licensing of patent, as stipulated in Article 76-1 of the old Patent Act was against Article 31(b) of TRIPs, and requested that the TIPO corrected the defects in Article 76-1 of the old Patent Act.

Article 31(b) (Other Use Without Authorization of the Right Holder) of TRIPs is derived from Article 5A of the Paris Convention for the Protection of Industrial Property, stating that where the law of a WTO Member allows for other use of the subject matter of a patent without the authorization of the right holder, including use by the government or third parties authorized by the government, such use may only be permitted if, prior to such use, the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time. This requirement may be waived by a Member in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. In situations of national emergency or other circumstances of extreme urgency, the right holder shall, nevertheless, be notified as soon as reasonably practicable. In the case of public non-commercial use, where the government or contractor, without making a patent search, knows or has demonstrable grounds to know that a valid patent is or will be used by or for the government, the right holder shall be informed promptly.

Returning to the provisions of Article 76-1 of the old Patent Act, it was regulated that as long as one of the following conditions existed, TIPO might, upon request by the applicant, grant a compulsory license to the applicant to practice the patent:
1. In the case of national emergency, a non-profit-seeking use of a patent for the enhancement of public welfare, or
2. When an applicant has failed to reach a licensing agreement with the patentee within a considerable period of time in spite of reasonable commercial terms and conditions already proposed to the patentee, or
3. If the patentee has committed unfair competition as confirmed through a judicial judgement or by the Fair Trade Commission of the Executive Yuan.

Despite the fact that Article 76-1 of the old Patent Act in 1997 was regulated based on Article 31-(b) of TRIPs, if we compare the underlined provisions shown in the preceding two paragraphs, we can easily tell that the TIPO had misunderstood of the implication of the underlined provision in Article 31(b) and mistakenly interpreted the meaning of it, with the result that the provisions in Article 76-1 in connection with compulsory licensing of patent were not in line with Article 31-(b) and had caused such a controversial issue in the Gigastorage case accordingly.

Given the lesson from the Gigastorage case and the pressure from the European side indicating that the threshold to compulsory licensing of patent in Taiwan was too low and Article 76-1 of the old Patent Act was in violation of the TRIPs, TIPO has determined to review compulsory licensing of patent and to conduct research on amending the old Patent Act.

In the upcoming new Patent Act, the ever-controversial provision “an applicant has made efforts to obtained authorization from the right holder on reasonable commercial terms and conditions, and that such efforts have not been successful within a reasonable limit of time” will no longer appear as a basic reason for the application of compulsory licensing of patent. Instead, the provision has become a premise where the patented invention is exploited non-commercially for enhancement of public interest and where a later invention or utility model patent cannot be exploited without infringing a prior invention or utility model patent, and where the later invention or utility model patent involves an important technical advancement of considerable economic significance in relation to the prior invention or utility model patent. (See Article 87 of the new Patent Act - Specifying grounds, procedures and compensation for compulsory licensing)

The new Patent Act also stipulates the compulsory licensing and exports for pharmaceuticals under the “Implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health” Decision made by the General Council of the WTO on 30 August 2003 to assist those countries which are incapable of or have insufficient capability of producing pharmaceuticals to gain pharmaceuticals needed to treat AIDS, tuberculosis, malaria or other infectious diseases. (See Articles 90-91 of the new Patent Act)