Tuesday, March 17, 2009 - The Progress & Freedom Foundation Blog

Bogus Reliance on the Clean Air Act's Compulsory Patent Licensing

Advocates for compulsory licenses of patented technologies in developing nations like to assert that such licensing is common in the United States.  If it's OK in the United States, then it ought to be OK elsewhere.  In my recent paper directed to Joseph Stiglitz's arguments, I explained in detail the impertinence of relying on the use of compulsory licenses in merger and antitrust proceedings in the United States.  See here at pages 17-20.

But the compulsory-license advocates make a lot of other misleading arguments.  This post focuses on one:  the compulsory licensing provision, section 308, of the Clean Air Act, codified at 42 U.S.C. s 7608.  (This provision is particularly noteworthy in light of my previous post about the inappropriateness of compulsory licensing for green technologies.)

Jamie Love likes to cite the example of the Clean Air Act because it establishes, as he puts it, "norms" for compulsory licensing in the United States.  What Love never mentions is that in the forty years this provision of the Clean Air Act has existed, it has never been invoked, and the structure of the provision seems designed to ensure that it never will.

Section 308 was created by the 1970 amendments to the Clean Air Act.  Pub. L. 91-604, 84 Stat. 1676 (1970).  It covers a compulsory license for certain air-pollution control technology only if all of the following substantive conditions are met:

-- the patented technology is "being used or intended for public or commercial use";

-- the patented technology is "not otherwise reasonably available" but for a compulsory license;

-- the patented technology "is necessary to enable" compliance with the Clean Air Act;

-- there are no "reasonable alternative methods" for complying with the Clean Air Act; and

-- "the unavailability of" the patent "may result in a lessening of competition or tendency to create a monopoly in any line of commerce."

One can see that these factors are exceedingly narrow.  As I noted in my earlier post, a single pollution-control technology is unlikely ever to be necessary given the likelihood of substitutes.  But the last requirement above is a real sticking point:  even if, say, a particular manufacturing plant needs to use a particular patent to comply with the Clean Air Act, a compulsory license will only issue if antitrust concerns arise. Under U.S. law, a patentee has an almost unbounded right not to license its technology if it so chooses.  See In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322 (Fed. Cir. 2000).  Thus, the language in the Clean Air Act probably deals not with the market in the patented technology, but with the market in which the (compulsory) licensee operates.  Thus, if I refuse to license my steel-plant smokestack-scrubber patent to you, you may be able to invoke the Clean Air Act's provision only if there are no alternatives to my patent and if, should your steel plant be forced to close down, there be a risk of monopolization in the steel industry.  That seems unlikely to happen.

But the limitations of the Clean Air Act do not end there.  The procedural roadblocks are even more formidable than the substantive roadblocks discussed above,  First, the Administrator of the Environmental Protection Agency needs to sign off on the compulsory license requested by the ostensible licensee.  Next, EPA then needs to get the Attorney General's approval.  Good luck with that.  But still there's more, because the Attorney General does not have the authority to grant compulsory licenses.  Instead, the Attorney General must choose to file a lawsuit in the federal district court, where the presiding district judge "may" -- or may not -- herself choose to authorize a license "on such reasonable terms and conditions of the court."  Only after the disputed judicial process does a license issue -- presumably years later.  Thus, getting a license under the Clean Air Act is like hitting the trifecta at the racetrack -- getting the EPA Administrator to take up your cause to the Attorney General, getting the Attorney General to become interested enough in your case personally to devote manpower to bringing a lawsuit, and then convincing a district court that the license is necessary.

All of these limitations help explain why in forty years the provision appears never to have been utilized.  There are no reported cases of district court proceedings under section 308 and no discussion by commentators of any unreported cases.

The legislative history of section 308 helps explain why we have an uninvoked and uninvokable provision in the law.  Originally, the section was part of a much broader licensing proposal by the Senate.  The House of Representatives, however, proposed no compulsory licensing whatsoever.   As a "compromise" that enabled the Senate to save face, the House cut back on the scope of the proposed compulsory license and added the layers of review by the Attorney General and the federal district court.  E.g., Conf. Rep. 91-1783, 1970 U.S.C.C.A.N. 5374, 5390.  The provision was bound never to be invoked and never has.

In order to make sure that U.S. law comported with article 1709, paragraph 10, of NAFTA, EPA issued rules in 1994 that heaped on additional requirements.  See 42 C.F.R. sections 95.1 - 95.4 (promulgated by Final Rule, 59 Fed. Reg. 67637 (Dec. 30, 1994)).  (Section 95.4 deals particularly with NAFTA-related requirements.)  Some regulatory limitations have nothing to do with NAFTA but make it even less likely that a section 308 license will ever issue.  For example, a compulsory license can only cover one patent, 42 C.F.R. s 95.3(a).  Thus, the ostensible compulsory licensee who needs to make use of several patents will have to obtain separate approval from the EPA Administrator, the Attorney General, and the district court for each and every patent.

What can we learn from all this?  If this provision of the Clean Air Act is used to support the "norms" regarding compulsory licenses in the United States, those norms suggest that compulsory licensing be so tightly circumscribed as never to be used.

posted by Sidney Rosenzweig @ 2:20 PM | IP