A compulsory license is, in general, a license granted by a government allowing a third party to work a patented invention even without the patent holder’s consent. It serves as a legal mechanism to balance the market exclusivity of patent rights with the public interest, ensuring access to essential goods or technologies, such as medicines, in cases, for example, where preventing access may harm unfairly the public interest.

Japanese Patent Law provides for the following three types of compulsory license:

1. A compulsory non-exclusive license for “non-working” patents based on Article 83. A person who intends to work a patented invention that has not been properly worked in Japan for more than three years can request the patentee to discuss granting of a non-exclusive license, with the proviso that four years or more have passed since the filing date of the patent (Article 83(1)). If the discussion is unsuccessful or if it is not possible to hold a discussion, then the person can file a compulsory license request to the Japan Patent Office (JPO) (Article 83(2)).
2. A compulsory non-exclusive license for “utilization relationship” between patent rights based on Article 92. When a person (first person) cannot work his/her own patented invention without working another person’s (second person) patented invention, the first person can request the second person to discuss granting of a non-exclusive license (Article 92(1)). The second person who has been requested to hold a discussion may request the first person who has requested the discussion, to discuss granting back a non-exclusive license, within the scope of the patented invention that the first party intends to work (Article 92(2)). If the discussion under Article 92(1) is unsuccessful or if it is not possible to hold a discussion, then the first person can file a compulsory license request to the JPO (Article 92(3)), and if the discussion under Article 92(2) is unsuccessful or if it is not possible to hold a discussion, then the second person can also file a compulsory license request to the JPO (Article 92(4)).
3. A compulsory non-exclusive license for “public interest” based on Article 93. When working of a patented invention is particularly necessary for the public interest, a person who intends to work the patented invention can request the patentee to discuss granting of a non-exclusive license (Article 93(1)). If the discussion is unsuccessful or if it is not possible to hold a discussion, then the person can file a compulsory license request to the JPO (Article 93(2)).

However, there have only been a few cases of requests for these compulsory licenses, and there have been no cases where a compulsory license has been granted ever.

In this situation, a request for a compulsory license was recently made on the grounds of “public interest” under Article 93(2), and attracted a lot of attention. Although this case ended in a settlement and thus a decision was avoided, it is the first case in Japan in which the JPO considered the possibility of granting a compulsory license in the procedure.

On July 13, 2021, Vision Care Inc. and VC Cell Therapy Inc. (hereafter “VCCT”) filed a request for a compulsory license (Request No. 2021-1) claiming “public interest” based on Article 93(2), for a patent (Patent No. 6518878) relating to a method for manufacturing retinal pigment epithelium (RPE) cells derived from induced pluripotent stem cells (iPS cells), which are co-owned by Helios Inc., RIKEN (the Institute of Physical and Chemical Research) and Osaka University. The following is the background leading to the compulsory license request.

The domestic development of the patented invention was carried out mainly by Sumitomo Pharma Inc., which has received an exclusive license from Helios. However, the development was difficult, and there was a significant delay in the schedule of clinical trials. In this situation, Dr. Masayo Takahashi, one of the inventors of the patented invention who had been leading clinical research using iPS cell-derived RPE cells at RIKEN, left RIKEN at the end of July 2019 and was appointed as the President and Representative Director of Vision Care on August 1 of the same year, with the aim of achieving practical application of the technology as soon as possible. Vision Care negotiated with the patent holders to secure the right to conduct clinical research using the patented invention. However, the negotiations were difficult, and Vision Care and VCCT (a subsidiary of Vision Care, where Dr. Takahashi serves as the President and Representative Director) ultimately decided to file the compulsory license request claiming “public interest” as their grounds under Article 93(2).

According to the press releases of each party, the process from the filing of the compulsory license request to the settlement was as follows. In response to the request, RIKEN stated that it was willing to enter into discussions, and Osaka University stated that it had no particular opinions on the request. On the other hand, Helios claimed that the compulsory license request should be dismissed or rejected. After some correspondence between the parties and the JPO, the JPO reached the conclusion that it would be preferable to resolve this case through voluntary discussions between the parties, and conveyed to the parties its provisional opinion that it is possible to grant the requestors a compulsory license to a certain extent within the subject matter of the compulsory license request, suggesting that they hold further discussions. After repeated discussions between the parties, a settlement was reached about three years after filing the compulsory license request.

Although the details of the settlement have not been disclosed, the patent holders have agreed not to enforce the patent right for the requestors’ acts, in medical treatment for RPE deficiency that the requestors are involved in and that is not covered by public medical insurance (hereinafter “the non-insurance medical treatment”), of manufacture, transfer and use of RPE cells derived from autologous iPS cells, under certain conditions.

This case is significant in that it is the first case in Japan in which, as a result of a compulsory license request, a non-exclusive license of a patented invention was agreed upon, and its background and procedure were partly publicized. The conveyance of the JPO’s positive opinion to the parties on the establishment of a compulsory license may have been a major motivating factor in reaching the settlement. On the other hand, the issue raised by this case is how to exercise patent rights for patented inventions that have a high degree of public interest. In particular, in the fields of medicine and biotechnology, there has been a long-standing debate about the impact of patent monopolies on the development of medicine, and there has been a system that can forcibly permit the implementation of patents for the sake of the public interest in Japan. However, there are many unclear points about how this system is applied, and this case has highlighted future issues regarding compulsory licensing. Major issues may involve the unclear scope and criteria for compulsory licensing, and the lack of speed in the process, etc., as technological innovation rapidly progresses. The key point will be how to strike a balance between protecting patent rights and the public interest.