Compulsory licensing in pharma: trends of Russian court practice and position of the Constitutional Court

Russian legal standards of compulsory licensing
Lack of use/insufficient use of patent
Patent dependency
Governmental order
Evolution of compulsory licensing cases
Position of the Constitutional Court
Potential impact

Russian legal standards of compulsory licensing

Russian judicial practice of patent disputes in the pharmaceutical industry has recently faced an increase in previously rare disputes involving compulsory licensing lawsuits.

As such, Russian legal norms on compulsory licensing are based on the Paris Convention for the Protection of Industrial Property and the Agreement on Trade-Related Aspects of Intellectual Property Rights, with domestic specifics provided in the Russian Civil Code.

There are two situations in which a court can grant compulsory licensing. In addition, Russian law provides that the Russian Government can issue an order allowing use of the invention without the patentee’s consent in cases of extreme necessity related to ensuring the defense and security of the state and protecting the life and health of citizens.

Lack of use/insufficient use of patent

The first legal ground for granting a compulsory license is lack of use or insufficient use (work) of the patent.

The applicable norm (Section 1, Article 1362 of the Russian Civil Code) does not provide for specific criteria for what shall constitute insufficient use.

However, by the sense of the norm in a pharma-related context, lack of use/ insufficient use alone is not enough – such lack/insufficient use shall lead to insufficient offer of the medicine on the Russian market.

Overall, the key conditions to apply this ground are as follows:

• Four years (grace period) have passed since the grant of the patent;
• There shall be a legitimate interest of the potential licensee – namely, they shall prove their desire and readiness to use the invention;
• The potential licensee shall prove deficiency of the patentee’s medicine on the market;
• There is no reasonable excuse established for lack of use or insufficient use;
• The lawsuit for seeking the compulsory license shall list terms of license, including scope of use of the invention, amount, ways and deadlines for license payments;
• License payments shall not be lower than license payments under comparable circumstances.

If the compulsory license is granted, the patentee is also entitled to file a separate lawsuit, arguing that the circumstances that led to the license grant ceased to exist and that their future appearance is unlikely. In this case, the court shall set the terms and consequences of license termination.

Patent dependency

The other ground for compulsory licensing featured in pharma disputes is the presence of the so-called “dependent patent,” defined either:

• as the invention whose use is impossible without using (infringing) the patent with an earlier priority date; or
• as the invention whose set of claims differs from the set of claims of the invention with earlier priority date only in the purpose of the product or method.

Key conditions also accompany the enforcement of this compulsory license ground by the court:

• The owner of the dependent invention cannot use their invention without infringing the rights of the owner of the patent with an earlier priority date;
• The owner of the dependent patent has the burden to prove that their dependent invention represents an important technological achievement and has a significant economic advantage as compared with the invention with an earlier priority date;
• The lawsuit for seeking the compulsory license shall list the terms of the license, including the scope of use of the invention, amount, ways, and deadlines for license payments;
• License payments shall not be lower than license payments under comparable circumstances.

Although the applicable norms do not expressly indicate how to terminate this type of license, from a legal perspective it is correct to argue that the license shall be terminated if the dependent patent is invalidated.

Pre-trial compliance is necessary for both situations of granting a compulsory license. A potential licensee shall send the patentee an offer to enter into a license and indicate specific terms of such license. If the patentee rejects the offer, then a compulsory license lawsuit can be filed with the court.

Governmental order

Grant of a compulsory license by the court under the above-discussed conditions shall not be mixed up with the specific administrative procedure that the Russian Government can use in cases of extreme necessity related to ensuring the defense and security of the state, as well as protecting the lives and health of citizens.

The specifics of these provisions are that they can be initiated by any interested person who files the application to the Ministry of Economic Development. As result of consideration of the application with involvement of other stake-holders (Ministry of Industry and Trade, Ministry of Health, Russian Patent Office, Federal anti-trust authority), the Ministry can send the opinion to the Governmental commission that makes a final decision whether to issue the Government order and what is the amount of remuneration that shall be paid to the patentee (with notification of the patentee).

Currently, more than 10 Government orders allow the use of pharma inventions, the first of which was issued during the COVID-19 pandemic. There were also examples where a Government order was challenged in the Supreme Court (procedurally, it is possible); however, the Supreme Court did not find grounds to revoke the order.

Evolution of compulsory licensing cases

For many years, the compulsory licensing provisions were not explored in judicial practice, and references to them were extremely low. However, in recent years, generic companies have made more active use of the compulsory licensing mechanism.

The first case where the court considered insufficient use of the patent started in Russia in 2022 and was considered by the Moscow City Commercial Court as the first-instance court. As a result of the court’s consideration, the compulsory license seeker failed to receive the compulsory license. The court specifically indicated that:

• the plaintiff did not provide evidence indicating lack of use or insufficient use of the patents;
• the defendant provided evidence of the presence of the patented medicine in the Russian market (namely, evidence of supply to the special patients fund, customs declarations, information of state tenders where the defendant’s medicine was supplied) and the court considered such evidence indicating sufficient use;
• the plaintiff did not prove their legitimate interest and readiness in using the defendant’s patents;
• no evidence of relevance of the claimed patents to either the plaintiff’s or the defendant’s medicines was provided by the plaintiff.

Remarkably, the court also applied the concept of estoppel because the plaintiff initially indicated several patents for which the four-year grace period had not expired.

Later, the plaintiff had to exclude those patents from the lawsuit. However, the court noted that the plaintiff, by indicating those patents, admitted that the license on those patents would be necessary for legal import of the plaintiff’s medicine. In this regard, the court concluded that granting a compulsory license in this case for the other patents (for which the grace period expired) will not lead to the validity of the license as such, and patent clearance and the court decision in this regard will not be enforceable.

The court also dismissed as irrelevant the plaintiff’s reference to the number of patients that can potentially need the defendant’s medicine – the reason for dismissing that argument was that the plaintiff did not provide evidence that for each patient the specific defendant’s medicine was or should have been prescribed by their attending doctor.

However, on appeal, the plaintiff managed to reverse the court decision, and a compulsory license was granted. The appeal court disagreed with the first-instance court and considered that some of the state tenders that were canceled because the participants filed no applications for supply indicated insufficient use of the patents.

Moreover, the appeal court also relied on the position that the number of patients can be used as the criterion for establishing where use is sufficient – thus ignoring the position of the first-instance court that there shall be evidence of whether each patient indeed needs the defendant’s medicine.

The Intellectual Rights Court and the Supreme Court upheld the position of the appeal court. In this regard, the defendant (patentee) and the third party (official distributor of the patentee’s medicine) filed complaints to the Constitutional Court arguing that such application of Section 1, Article 1362 of the Russian Civil Code is unconstitutional.

Position of the Constitutional Court

Although the Constitutional Court ruled that the challenged legal norm is constitutional, it still formulated some legal positions regarding the application of Section 1, Article 1362 of the Russian Civil Code. In particular:

• compulsory license shall be an extraordinary measure for limiting IP rights;
• compulsory license shall not be a sanction for improper use of IP rights, but shall be considered as having the purpose of remedying the market deficiency and ensuring that such deficiency will not arise;
• the Constitutional Court outlined that excessive use of compulsory licensing without sufficient grounds may lead to the risk of discrediting the Russian jurisdiction in terms of its investment attractiveness for business activities and the import of innovative products into the country;
• it is expressly noted that court decisions on compulsory licenses must be substantiated and properly reasoned, taking into account the complexity and specifics of the case and the established factual circumstances;
• not in all cases, as such a discrepancy between the actual volume of deliveries and the number of potential consumers (e.g., patients) is absolute proof of insufficient use;
• in assessing insufficient use, courts must examine whether the current demand for the patented product is being satisfied and whether, and to what extent, the patentee is capable of satisfying such demand in the future;
• the patentee must demonstrate their readiness to supply the patented product taking into account the capabilities of their production facilities and any other contractual supply obligations they have. These capabilities and other objective factors may be of significance to the patentee and considered as circumstances that can be recognized by the court as valid and therefore prevent the granting of a compulsory license;
• the Constitutional Court specifically noted the necessity to study what patents are actually relevant for the plaintiff’s products – to avoid the grant of excessive licenses;
• attention is given to the price difference issue – undue and unmotivated high pricing of the patented medicine can be among the factors triggering the grant of the compulsory license;
• specific attention is made by the court to the determination of the term (duration) of the compulsory license by indicating that duration depends on the analysis by the court of each specific situation in its dynamic (bearing in mind that the duration of the license shall serve to eliminate the established deficiency);
• determination of the patent relevance as well as determination of license financial terms can require special knowledge, which makes it necessary to engage experts/specialists in the relevant fields;
• lawsuits to terminate compulsory licensing can be filed by the patentee numerous times.

Potential impact

The position of the Constitutional Court shall not be considered as inviting the filing of compulsory license lawsuits or making the process of their grant easier – on the contrary, it sets stricter standards for the plaintiffs and calls for more careful analysis by courts.

However, since the decision is quite fresh, it remains to be seen how lower courts will apply the Constitutional Court’s legal position in final decisions.

Furthermore, the Constitutional Court indicated that the legislator may additionally specify the conditions for granting compulsory licenses, in particular by establishing methods for calculating the shortage of supply of goods, works, and services for the purposes of applying Section 1, Article 1362 of the Russian Civil Code.

Meanwhile, the Constitutional Court’s attention to compulsory licensing issues indicates the complexity of these disputes, the numerous factors requiring special approaches, and the need to use clear criteria that balance the public and private interests of all parties to the case, rather than vague or insufficiently detailed positions. Currently, such disputes are considered by general commercial courts that previously have not dealt with compulsory licensing cases regularly.

However, quite recently, the legislative initiative has taken shape to transfer consideration of compulsory license disputes to the specialized court – the Intellectual Rights Court that already operates as the exclusive jurisdictional court for some IPrights-related disputes. If the bill is passed, the procedure can change starting from January 1, 2027.

The Russian Government supports that initiative that may indeed have a positive impact on further consideration of compulsory licensing disputes, ensuring correctness and a more effective approach to those cases while avoiding unnecessary restrictions on exclusive rights.