1. Current Framework

1.1. Viet Nam IP Law

Vietnam, like many developing nations, faces a delicate balance between promoting innovation through IP protection and ensuring access to essential goods and services for its citizens. The IP Law provisions on compulsory licensing reflect this tension, outlining circumstances where the government can intervene in IP rights for the public good. Key takeaway included:

Broad Authority: Articles 7(3) and 133 empower the government to restrict or compulsorily license inventions for a wide range of reasons, including:

National defense and security
Public health and disease prevention
Public welfare and urgent social needs
Non-commercial purposes in specific domains

Ministerial Powers: Articles 133 and 136 grant ministries the right to directly use inventions for these purposes without seeking the owner's permission.

Owner Obligations: Article 136 obligates invention owners to manufacture protected products or apply protected processes to meet essential national needs. Failure to do so can trigger compulsory licensing.

Four Grounds for Compulsory Licensing: Article 145 specifies four major grounds for licensing an invention without the owner's consent:

Public Interest: For public or non-commercial purposes, national defense, public health, etc.
Owner Non-compliance: If the owner fails to fulfill manufacturing obligations within a specified timeframe.
Negotiation Impasse: If a reasonable licensing agreement cannot be reached despite good faith efforts.
Anti-competitive Practices: If the owner engages in practices like price gouging or limiting production.

License Restrictions: Article 146 imposes limitations on compulsory licenses granted:

Non-exclusivity: Only non-exclusive licenses are issued, preventing monopolies.
Limited Scope and Duration: The license scope and duration are tailored to achieve the specific public objective, primarily serving the domestic market (except in anti-competitive cases).
No Sub-licensing: Licensees cannot further sub-license the invention, except under specific circumstances.
Fair Compensation: The licensee must pay the owner fair compensation based on the economic value of the usage right.

The Vietnamese IP Law, specifically Article 146(1)(d), dictates compensation for compulsory licensing in a broad framework, leaving specifics to be determined by government regulations. Here's a breakdown of the key points:

Factors Considered:

Economic value of the usage right: The compensation should reflect the economic value of the specific use granted through the compulsory license. This could include factors like the type of invention, its market value, and the scope of the license granted.
Reasonableness: The compensation must be reasonable in the context of the specific case, considering both the public interest objectives and the legitimate interests of the invention owner.
Government Regulations: The government will issue specific regulations outlining the methodology for calculating and determining fair compensation in different scenarios.

Additional Points:

The law doesn't provide a minimum or maximum percentage for compensation. This flexibility allows for tailoring to specific situations and encourages negotiation between the inventor and licensee.
The government regulations, once issued, are expected to provide more detailed guidance on factors like royalty rates, profit-sharing mechanisms, and other potential forms of compensation.
Transparency and predictability are crucial aspects of the compensation system. The regulations should outline clear procedures for determining and negotiating compensation and minimizing potential disputes.

Potential Challenges:

Determining the economic value of the usage right, especially for inventions with broad applications or those not yet commercially established, can be complex.
Balancing the public interest goals of compulsory licensing with the inventor's right to fair compensation can be a delicate exercise.
Lack of established precedents and specific regulations may initially lead to uncertainty and potential disputes regarding compensation.

Overall, the Vietnamese IP Law provides a flexible framework for compensation in compulsory licensing cases, emphasizing fairness and consideration of both public and private interests. The upcoming government regulations will be crucial in providing specific guidelines and establishing a predictable system for determining and negotiating fair compensation in these situations.

1.2. The TRIPS Agreement

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, a cornerstone of the World Trade Organization (WTO), navigates the complex terrain between protecting intellectual property (IP) rights and ensuring access to essential goods like medicines. This summary delves into the Agreement's provisions on compulsory licensing, a mechanism enabling governments to override patent monopolies for public health or other compelling reasons.

General Exceptions and Compulsory Licensing (Articles 30 & 31):

Article 30 acknowledges that limited exceptions to exclusive patent rights may be necessary. However, such exceptions must not unreasonably hinder the patent holder's exploitation or prejudice their legitimate interests, while also considering third parties' concerns.

Article 31 further elaborates on compulsory licensing as a safeguard against patent abuse, unreasonable harm to stakeholders, or conflicts with normal exploitation. Key tenets include:

Prior Negotiation: Before resorting to compulsory licensing, the potential user must demonstrate good faith efforts to obtain commercial authorization from the patent holder within a reasonable timeframe.
Adequate Remuneration: The patent holder must receive fair compensation, considering the economic value of the authorization granted.
Additional Conditions: The license is non-exclusive (maintaining the patent holder's rights), non-assignable (except with the enterprise granting the use), and subject to potential review at the patent holder's request.

Doha Declaration and the Rise of "Paragraph 6" Mechanisms (Article 31bis):

Recognizing the challenges faced by developing countries in accessing affordable medicines, the Doha Declaration (2001) and subsequent Protocol (2005) introduced Article 31bis. This amendment empowers WTO members to grant special compulsory licenses solely for producing and exporting generic medicines to countries in need.

Key Features of Article 31bis:

Focus on Pharmaceuticals: This provision exclusively targets pharmaceutical inventions, aiming to bridge the gap in access to crucial medicines.
Export Flexibility: Unlike standard compulsory licenses restricted to domestic markets, Article 31bis allows exporting medicines produced under these licenses, even to countries lacking domestic production capacity.
Overriding Domestic Market Limitations: This provision bypasses the "predominantly for the domestic market" requirement of Article 31(f), facilitating wider distribution of life-saving drugs.

Implications and Future Trajectory:

The TRIPS Agreement and its amendments on compulsory licensing strive for a delicate balance between fostering innovation through IP protection and guaranteeing access to vital goods, particularly in the realm of healthcare.

Benefits: Article 31bis empower developing countries to address public health emergencies and improve access to affordable medicines for their citizens. It fosters collaboration between nations with production capacity and those facing supply constraints.
Challenges: Concerns remain around potential disincentives for pharmaceutical R&D due to compulsory licensing possibilities. Balancing fair compensation for patent holders with affordability for vulnerable populations continues to be a crucial consideration.

As the global landscape of health and technology evolves, the debates surrounding compulsory licensing and IP protection are likely to remain dynamic. Finding sustainable solutions that prioritize both innovation and public health will be an ongoing challenge with significant ethical and economic implications.

2. Procedure

The Vietnamese IP Law outlines the key stages of the government procedure for compulsory licensing an invention, though specific details remain subject to future regulations. Here's a breakdown of the steps involved:

1. Petition and Review:

Who can file? An organization or individual seeking to use an invention under compulsory license can submit a petition to the relevant authority.
Requirements: The petition must specify the grounds for compulsory licensing (as outlined in Article 145), the desired scope and duration of the license, and the proposed compensation for the invention owner.
Initial Review: The relevant authority (Ministry of Science and Technology or respective ministries depending on the grounds) will review the petition for completeness and compliance with legal requirements.

2. Consultation and Investigation:

Expert Advice: The relevant authority may consult with technical experts and other relevant parties to assess the validity of the petition and potential impact of the license.
Investigation: Further investigation or public hearings may be conducted to gather additional information and ensure transparency in the process.

3. Decision and Notification:

Decision-making: Based on the petition, review, and any additional information gathered, the relevant authority will issue a decision granting or denying the compulsory license.
Notification: Both the petitioner and the invention owner will be promptly notified of the decision, with explanations for the reasoning behind it.

4. Appeal and Legal Remedies:

Appeal Mechanism: Either party (petitioner or inventor) can appeal the decision to a higher authority or through the court system if they disagree with the outcome.
Legal Action: The invention owner may also take legal action if they believe the compulsory license infringes on their legitimate rights or the compensation is unfair.

5. License Implementation:

License Terms: If the license is granted, the terms and conditions as outlined in the decision, including scope, duration, and compensation, will come into effect.
Monitoring and Oversight: The relevant authority may monitor the implementation of the license to ensure compliance with the terms and address any potential issues.

Additional Points:

The government is expected to issue further regulations clarifying specific procedures for each stage, including timelines, forms, and dispute resolution mechanisms.
Transparency and due process are emphasized throughout the procedure, with opportunities for both sides to present their arguments and be informed of decisions.
The specific duration of each stage might vary depending on the complexity of the case and the need for additional information or investigations.

3. Possible Impact

The impact of compulsory licensing on healthcare, technological development, and society presents a complex tapestry of potential benefits and challenges. In healthcare, compulsory licensing can be a powerful tool to increase access to affordable medicines, particularly in developing countries, by enabling local production of generic versions of patented drugs. This can significantly improve public health outcomes and address health disparities. However, it raises concerns about disincentivizing pharmaceutical R&D, as concerns over potential future compulsory licenses could dissuade investments in developing new drugs.

For technological development, the picture is nuanced. While compulsory licensing can encourage local manufacturing and technology transfer, potentially sparking domestic innovation ecosystems, it could also dampen innovation if companies perceive their IP investments as less secure. Balancing incentives for both local production and continued R&D remains a delicate act.

Beyond healthcare and technology, compulsory licensing can impact broader societal dimensions. On the one hand, it can promote equity and access to essential goods, ensuring a fairer distribution of benefits from innovation. On the other hand, potential downsides include reduced foreign investment and trade disputes, as concerns over IP protection can deter international collaborations and technology transfer.

4. Conclusion

Compulsory licensing in Vietnam represents a critical tool for balancing access to essential goods with fostering innovation. Navigating this complex terrain requires a nuanced approach that prioritizes public welfare while recognizing the importance of IP protection. By focusing on targeted applications, strengthening the innovation ecosystem, and embracing international cooperation, Vietnam can leverage CL to achieve sustained progress in both ensuring affordability and nurturing domestic innovation.

If you need further explanation on this subject, please don't hesitate to contact us through email at dung@luatminhkhue.vn or phone number: +84986 386 648. Lawyer To Thi Phuong Dzung.