Patent protection is one of the most significant mechanisms for promoting innovation and technological development within the framework of industrial property law. By granting exclusive rights to inventors, patent law provides the necessary incentives for investment in research, technological advancement, and the commercialization of inventions. However, patent rights are not absolute. In certain circumstances, the public interest may require that persons other than the patent holder be permitted to exploit a patented invention.

In such cases, the institution of compulsory licensing serves as one of the most important limitations on the exclusive rights of patent owners. This legal mechanism seeks to strike a balance between the private rights of inventors and the public interest, ensuring that while incentives for innovation are preserved, patent exclusivity does not become an obstacle to economic development, public health, fair competition, or access to essential technologies.

Today, compulsory licensing is recognized in many legal systems worldwide as well as in international intellectual property instruments. Iranian lawmakers have likewise incorporated this institution into the country’s industrial property framework.

 

The Concept of Compulsory Licensing

A compulsory license is an authorization granted by a competent authority without the consent of the patent holder, permitting the government or a third party to exploit a patented invention under specified conditions. In return, the patent holder is entitled to receive adequate remuneration.

Unlike voluntary licenses, which are based on contractual agreements between the parties, a compulsory license derives from the exercise of public authority in pursuit of the public interest. Consequently, it may only be granted under exceptional circumstances and in accordance with prescribed legal procedures.

The primary rationale behind compulsory licensing is to prevent the abuse of exclusive rights and to ensure public access to essential technologies and products. In essence, it is a mechanism through which the legislature seeks to balance patent rights with broader societal needs.

 

Legal Foundations and Rationale for Compulsory Licensing

Intellectual property protection is designed to encourage creativity, innovation, and technological progress. Nevertheless, if a patent holder exercises exclusive rights in a manner that harms the public interest, the very justification for patent protection may be undermined.

For this reason, many legal systems provide for compulsory licensing as a means of preventing abuse of rights and safeguarding public welfare. The principal legal foundations of compulsory licensing include:

  • The prohibition of abuse of rights;
  • Protection of the public interest;
  • Promotion of fair market competition;
  • Prevention of technology hoarding;
  • Fulfillment of essential societal needs;
  • Economic and industrial development.

Within the Iranian legal system, Article 40 of the Constitution, which provides that the exercise of rights must not result in harm to others or to the public interest, may also be regarded as one of the theoretical foundations for compulsory licensing.

 

The Position of Compulsory Licensing in International Intellectual Property Law

Compulsory licensing has a long-standing history in international intellectual property law. The most significant international instruments recognizing this institution include the Paris Convention and the TRIPS Agreement.

  • The Paris Convention

The Paris Convention for the Protection of Industrial Property authorizes member states to adopt legislative measures providing for compulsory licenses in order to prevent abuses resulting from the exercise of patent rights, including the failure to work a patent.

Accordingly, where a patent holder fails to exploit a patented invention or where exploitation is insufficient, a compulsory license may be granted.

  • The TRIPS Agreement

Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sets forth the conditions under which compulsory licenses may be issued. While safeguarding the rights of patent holders, the Agreement permits governments to grant compulsory licenses in circumstances such as national emergencies, public interest considerations, anti-competitive practices, and dependent patents.

Today, the compulsory licensing provisions of many countries are inspired by these international standards.

 

Grounds for Granting Compulsory Licenses in Industrial Property Law

  1. Protection of the Public Interest

The most important basis for granting a compulsory license is the necessity of protecting the public interest. Where access to a particular technology or essential product is of vital importance to society, the government may authorize the exploitation of a patented invention without the patent owner’s consent.

The concept of public interest is flexible and may vary depending on the circumstances. For example, in an industrialized country, preserving economic competition may be considered a matter of public interest, whereas in a developing country, technology transfer and industrial development may assume greater importance.

  1. National Security

A compulsory license may be granted where exploitation of a patented invention is necessary to safeguard national security or satisfy defense-related needs.

This issue is particularly significant in relation to sensitive technologies, defense industries, and strategic equipment, where dependence on the exclusive discretion of a patent holder could adversely affect national interests.

  1. Protection of Public Health

One of the most prominent applications of compulsory licensing at the international level concerns public health.

In situations such as disease outbreaks, shortages of essential medicines, or urgent needs for medical equipment, governments may issue compulsory licenses to ensure public access to such products.

The importance of this mechanism has become increasingly evident during recent global health crises.

  1. Addressing Anti-Competitive Practices

A patent holder may sometimes exercise exclusive rights in a manner that distorts market competition. Examples include:

  • Charging excessive prices;
  • Restricting the supply of products;
  • Imposing unfair contractual conditions;
  • Creating barriers to market entry for competitors.

In such circumstances, compulsory licensing may serve as a corrective tool to mitigate the harmful effects of anti-competitive conduct and restore market balance.

  1. Non-Working or Insufficient Working of the Patent

One of the most well-established grounds for compulsory licensing is the failure to exploit a patented invention.

Patent rights are granted to encourage innovation and technology transfer. Therefore, if the patent holder fails to use the patented technology or does not supply products in quantities sufficient to meet market demand, the fundamental objectives of the patent system may not be achieved.

Under such circumstances, the legislature may issue a compulsory license to prevent the hoarding of technology and facilitate public access to it.

Nevertheless, the patent holder may provide legitimate justifications—such as technical, economic, or legal obstacles—for the failure to exploit the invention. In such cases, the issuance of a compulsory license may not be warranted.

  1. Dependent Patents

Dependent patents constitute another important category of compulsory licensing.

A dependent patent is one whose exploitation is not possible without the use of an earlier patented invention. In such cases, the holder of the later patent must necessarily use the earlier patent in order to exploit the subsequent invention.

If the owner of the earlier patent refuses to grant a voluntary license, a compulsory license may be issued, provided that the later invention represents a significant technical advance and possesses considerable economic value.

The purpose of this provision is to prevent technological stagnation and facilitate the development of new innovations.

  1. Cross-Licensing Arrangements

In cases involving dependent patents, legal systems often provide for reciprocal licensing arrangements in order to maintain a balance between the rights of the respective patent holders.

Under such arrangements, just as the owner of the later patent may be granted access to the earlier patent, the owner of the earlier patent may also be entitled to exploit the later invention under specified legal conditions.

This mechanism prevents the emergence of disproportionate monopolistic advantages among holders of interrelated patents.

 

Conditions for Granting a Compulsory License

The issuance of a compulsory license is subject to specific legal requirements, including:

  • The existence of a legally recognized ground for granting the license;
  • Demonstration of the necessity of exploitation;
  • Limitation of the license to the purpose for which it is granted;
  • Payment of adequate remuneration to the patent holder;
  • Specification of the duration, scope, and manner of exploitation;
  • Respect for the legitimate rights of the patent owner.

Since compulsory licensing constitutes an exception to the principle of patent exclusivity, competent authorities must exercise particular care in granting such licenses.

 

Rights of the Patent Holder

The issuance of a compulsory license does not deprive the patent owner of ownership rights. The patent holder remains the owner of the patent and retains several important rights, including:

  • The right to receive fair remuneration;
  • The right to be informed of the scope and conditions of exploitation;
  • The right to challenge unlawful decisions;
  • The right to request review or termination of the license if circumstances change;
  • The right to retain all exclusive rights outside the scope of the compulsory license.

Accordingly, a compulsory license merely limits the exercise of patent rights and does not transfer ownership of the patent.

 

Revocation of a Compulsory License

A compulsory license may be revoked if the circumstances that justified its issuance cease to exist or if the licensee fails to comply with the prescribed conditions.

Likewise, where the original necessity for the license no longer exists and is unlikely to recur, the competent authority may decide to terminate or modify the license.

However, in certain circumstances, the continued validity of the license may be necessary to protect the legitimate interests of persons who have made investments in reliance upon it.

 

Conclusion

Compulsory licensing is one of the most important legal mechanisms for balancing the exclusive rights of patent holders with the public interest. While the protection of inventors and the preservation of patent exclusivity remain fundamental principles of patent law, exceptional circumstances relating to public welfare, public health, national security, technological development, or fair economic competition may justify the exploitation of a patented invention without the owner’s consent.

Within Iranian industrial property law, compulsory licensing occupies a clearly defined position and serves as an exceptional remedy aimed at preventing the abuse of exclusive rights and ensuring public access to essential technologies. As such, it may be viewed as a legal instrument for reconciling the protection of innovation with the promotion of public welfare—an objective that lies at the heart of contemporary intellectual property systems.