REGULATORY SCRUTINY BOARD OPINION Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on compulsory licensing for crisis management and amending Regulation (EC) 816/2006

EUROPEAN COMMISSION
Brussels, 3.2.2023
SEC(2023) 173 final
REGULATORY SCRUTINY BOARD OPINION
Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE
COUNCIL on compulsory licensing for crisis management and amending Regulation
(EC) 816/2006
{COM(2023) 224 final}
{SWD(2023) 120 final} {SWD(2023) 121 final} {SWD(2023) 122 final}
Offentligt
KOM (2023) 0224 - SEK-dokument
Europaudvalget 2023
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This opinion concerns a draft impact assessment which may differ from the final version.
Commission européenne, B-1049 Bruxelles - Belgium. E-mail: regulatory-scrutiny-board@ec.europa.eu
EUROPEAN COMMISSION
Regulatory Scrutiny Board
Brussels,
RSB
Opinion
Title: Impact assessment / Compulsory licensing for crisis management
Overall opinion: POSITIVE WITH RESERVATIONS
(A) Policy context
A Compulsory License (CL) is an authorisation granted under specific circumstances by a
government to a party other than the Intellectual Property (IP) right holder to use a licence
on patented invention without the consent of the IP right holder, against an adequate
remuneration. The aim of such an authorisation is to secure in times of crisis the supply of
and access to critical goods and / or components within the single market that could
otherwise only be supplied by the IP right holder.
The aim of this initiative is to establish an EU-level CL with a streamlined procedure to
address the current challenges of EU Member States to address supply-shortages of goods
and components related to crises with a cross-border dimension. This incapacity is caused
by the fact that EU Member States can only act nationally and therefore grant a CL only
for their own territory. It is also caused by divergent and often sub-optimal CL schemes in
place in EU Member States. This initiative aims to address these problems by establishing
rules to grant an EU-level CL applicable in a cross-border crisis situation to ensure that
critical products and components can be made available across EU countries.
(B) Summary of findings
The Board notes the additional information provided and commitments to make
changes to the report.
However, the report still contains significant shortcomings. The Board gives a
positive opinion with reservations because it expects the DG to rectify the following
aspects:
(1) The problem definition is not sufficiently clear on the remaining scale of the
problem.
(2) The report does not sufficiently describe the content and functioning of the EU
level options, including the intended safeguards. The expected efficiency gains
and overall effectiveness are not sufficiently demonstrated.
(3) The report does not comprehensively analyse the impact on competitiveness and
innovation, including investments in innovative products in case of crisis.
Ref. Ares(2023)801849 - 03/02/2023
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(C) What to improve
(1) The problem definition should be clearer on the scale of the problem and the
likelihood that the envisaged EU CL rules will be needed, adequately reflecting the effects
of other recent EU crisis management instruments, such as Single Market Emergency
Instrument and Health Emergency Preparedness and Response Authority and clarifying
what gap EU CL rules would cover. It should better illustrate which recent concrete crisis
situations and/or crisis use cases would have clearly benefitted from the availability of EU
CL rules. It should bring out more clearly the underlying narrative for the use of the
instrument and its expected exceptional use. It should clarify the applicable definitions of
the various crises covered as well as related critical products.
(2) The report should better describe the content and functioning of the EU level options.
It should explain the necessary conditions for granting an EU CL, such as availability of
adequate alternative manufacturing capacity or the lack of less intrusive measures. It
should further develop the description of the safeguards that will be put in place to prevent
any potential misuse of the EU CL (such as that the licensee will continue to take
advantage of transferred knowhow during the post crisis period), and to address the
observations of stakeholders. In particular, it should be clearer about the specific
conditions that would provide the basis for such safeguards in the different phases of the
CL process (i.e pre-granting, granting and post-granting phase). It should explain how
adequate and fair renumeration will be ensured for the licence and the potential transfer of
knowhow, while reflecting the investment risk situation that highly innovative critical
products may face.
(3) The report should better describe the envisaged implementing acts for activation and
granting decisions. It should better explain any content and procedural differences between
an EU level triggered decision and a decision triggered upon request by more than one
Member State. It should better justify the need for and proportionality of having two
different trigger mechanisms for EU level CL.
(4) The report should better demonstrate how the new procedures for issuing the
compulsory license can ensure an outcome in a timely manner, covering the different steps:
critical product identification and their corresponding patents, the potential negotiation, a
potential appeal, the potential transfer of knowhow and the provision of manufacturing
capacity until the production of the first batches of the critical product. The envisaged
efficiency gains in terms of decision-making, potential access to accelerated or streamlined
procedures, and efficient procedures for legal redress should be clearly explained. The
report should also better demonstrate the effectiveness of the preferred option by being
clearer on how a CL would be implemented and effectively enforced, including in terms of
necessary incentives.
(5) The report should further investigate the potential trade-off under the preferred option
between keeping the incentives for innovation through IP protection while ensuring at the
same time access to critical products in cross-border crisis situations through compulsory
licensing. The report should draw upon existing literature on both potential positive and
negative impacts on innovation of compulsory licensing to provide a basis for a balanced
assessment, and by better presenting the divergent views of affected stakeholders. In
particular the report should consider the possible impact on the willingness of businesses to
invest in research and innovation in case of crisis. The analysis of competitiveness and
trade impacts should be strengthened, including by differentiating between potential short
and long term effects. The report should also assess any unintended consequences that may
result from the preferred option.
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(6) The classification of the costs should be clarified clearly distinguishing and explaining
both the adjustment and administrative costs. Costs and cost savings in scope of the One
In, On Out approach should be specified.
The Board notes the estimated costs and benefits of the preferred option(s) in this
initiative, as summarised in the attached quantification tables.
Some more technical comments have been sent directly to the author DG.
(D) Conclusion
The DG must revise the report in accordance with the Board’s findings before
launching the interservice consultation.
If there are any changes in the choice or design of the preferred option in the final
version of the report, the DG may need to further adjust the attached quantification
tables to reflect this.
Full title Proposal for a Regulation of the European Parliament and the
Council on compulsory licensing for crisis management
Reference number PLAN/2021/11425
Submitted to RSB on 09/01/2023
Date of RSB meeting 01/02/2023
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ANNEX: Quantification tables extracted from the draft impact assessment report
The following tables contain information on the costs and benefits of the initiative on
which the Board has given its opinion, as presented above.
If the draft report has been revised in line with the Board’s recommendations, the content
of these tables may be different from those in the final version of the impact assessment
report, as published by the Commission.
I. Overview of Benefits (total for all provisions) – Preferred Option
Description Amount Comments
Direct benefits
Reduction in
administrative cost
of CL granting
75%-80% less
resources than in the
baseline, in case of a
cross border crisis.
Fragmented CL procedures will be replaced by an EU-
level CL (single procedure).
Main recipients: firms involved in CL granting process.
Access to critical
goods in times of
crisis.
Impossible to quantify Availability of products that otherwise would not be
accessible, which also prevent other costs from occurring.
Main recipients: Citizens or firms in need of the critical
goods.
Indirect benefits
Better overall EU-
level response to
crisis due to
availability of
critical goods.
Impossible to quantify Wide socio-economic benefits due to limited scale of a
crisis
Main recipients: Citizens / the entire society.
Administrative cost savings related to the ‘one in, one out’ approach*
n.a. n.a. n.a.
II. Overview of costs – Preferred option
Citizens/Consumers Businesses Administrations
(Member States)
One-off Recurrent One-off Recurrent One-off Recurrent
Create
EU-level
CL for
crisis
managem
ent
Direct
adjustment
costs
0. 0 0 0
Cost of
implementing
the legislation
0
Direct
administrative
costs1
0 0 0
Costs of CL
negotiations (but
lower than in status
quo as a single
procedure at EU level
would replace
multiple procedures in
each MS concerned)
0
Cost of MS
involvement in
the committee
for the adoption
of the activation
measure2
.
1
The frequency of recurrent costs is expected to be extremely low, as they would be incurred only in case
of a cross-border crisis and if there is a need to use compulsory licensing for crisis management.
2
If establishing a separate committee necessary (otherwise the existing bodies would be used).
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Direct
regulatory
fees and
charges
0 0 0 0 0 0
Direct
enforcement
costs
0 0 0 0 0 0
Indirect costs 0 0 0 0 0 0
Costs related to the ‘one in, one out’ approach
Total
Direct
adjustment
costs
0 0 0 0
Indirect
adjustment
costs
0 0 0 0
Administrativ
e costs (for
offsetting)
0 0 0 0
Electronically signed on 03/02/2023 11:35 (UTC+01) in accordance with Article 11 of Commission Decision (EU) 2021/2121