From Monopoly to Mandatory: Exploring Compulsory Licensing of Patents in Vietnam

By Ngan Pham

An invention is the creation of a product or a process that provides, in general, a new way of doing something or a new technical solution to an existing problem, that involves enormous intellectual and financial investment. Thus, to reward innovators and stimulate R&D activities and technological innovation, patent law grants them exclusive monopoly over the patented invention, which means giving the owners the right to legally prevent third parties, for a limited period of time, from making, using or selling the invention without their consent.

However, under exceptional circumstances as stipulated by Law, and where certain requirements are met, the government is entitled to impose a compulsory license relative to the patent, i.e, a non-exclusive use of patented invention, to a third party without the explicit permission of the patent owners. Such non-voluntary licensing is based on an administrative decision by a competent authority so the will of the owner is not taken into account as in normal contractual licenses.

Article 5A of the Paris Convention states that “Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work”. Later on, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) also reaffirms and stipulates provisions for granting compulsory licenses under Article 31 in which lists a set of conditions for issuing compulsory licenses.

Based on regulations of international treaties, Vietnam specifies grounds and limiting conditions for the grant of compulsory patent licensing, as set out below:

Grounds for compulsory licensing of patents

The main principles aim at controlling the exclusive abuse of patent owners, for public and social purposes and for the use of dependent inventions. Accordingly, Article 145 of Vietnam IP Law set forth some grounds in which compulsory licensing may be applied:

Where such invention is used for public and non-commercial purposes or national defence and security, disease prevention, and treatment and nutrition of people or other urgent needs of society;
Where the holder fails to fulfill the obligations to use such invention after four years from the filing date of the application for registration of the invention, or after three years from the granting date of the patented invention;
Where a person who wishes to use the invention fails to reach a license agreement with the holder irrespective of efforts made within a reasonable time in negotiating a mutually acceptable price and reasonable conditions;
Where the holder is deemed to have performed anti-competitive practices prohibited by the law on competition.
Where the use of an invention is to meet the demand for pharmaceutical products for the prevention and treatment of diseases of another country that is eligible for import under international treaties to which Vietnam is a contracting party. This ground was supplemented in Vietnam’s amended IP Law 2022, as effective from January 2023.

Limiting conditions of the exercise of licensing

A non-voluntary license of patent is limited by strict conditions in order to control this activity, specifically:

Such licensed right is non-exclusive. The patent owner or the person who is granted an exclusive license for the invention may use and exploit the invention at the same time.
Limited to a scope and duration sufficient to achieve the licensing objectives, except for the case where the holder is deemed to have performed anti-competitive practices prohibited by the law on competition. For inventions related to semi-conducting technology, licensing shall be only for public and non-commercial purposes or for dealing with anti-competitive practices prohibited by the law on competition.
The licensee must neither assign nor sublicense such right to others, except where the assignment of the licensee’s business establishment concurrently happens and the right to use such inventions are not sublicensed to others.
The licensee shall pay the holder compensation under agreement. In case an agreement is not reached, regulations of the Government shall be applied. This provision was amended in Vietnam IP Law 2022 by adding an exception where a license compensation is not required in cases where the compulsory license of the invention is for importing pharmaceuticals under an international treaty to which the Socialist Republic of Vietnam is a signatory and the compensation has been paid in the exporting country.
Mainly for the domestic market, unless it involves anti-competitive practices or the use of an invention to meet pharmaceutical demands of another eligible country based on international treaties to which Vietnam is a contracting party.

In cases where a dependent invention makes important technical advancements as compared to the principal invention and has great economic significance, where the owner of the dependent invention fails to negotiate a licence agreement with the owner of the principal invention, a compulsory licence authorization may be imposed with two additional conditions: (1) The holder of the principal invention shall also be licensed to use the dependent invention under reasonable conditions and (2) the licensee of the principal invention must not assign such right, except where the assignment of all rights to dependent inventions is carried out.

Want to know more? Do reach out to us at kass@kass.asia if you have any questions regarding patent protection in Vietnam!

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Communications at KASS International Sdn Bhd

KASS International is an established Intellectual Property Firm which offers a one-stop solution for IP matters in Malaysia, South East Asia, and worldwide.