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Antitrust / Competition

Egypt: Compulsory Licensing – A Potential Remedy for Anticompetitive Practices

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What’s changed

The Egyptian Prime Minister has established a ministerial committee under the Intellectual Property Law No. 82/2002 (“IP Law“) for compulsory licensing. The compulsory licensing mechanism as set by the IP Law covers all sorts of patents in all sectors of the economy. The ministerial committee will (i) order that compulsory licenses be granted in a number of cases as stated in the IP Law (including engaging in anticompetitive practices), (ii) set the financial remuneration for the owner of the IP right and (iii) approve the expropriation of the patents. This is the first time that this committee has been established since the adoption of the IP Law.

The Chairman of the Egyptian Competition Authority (“ECA“) is a member of this new committee. In light of the numerous competition enforcement actions against pharmaceutical and medical related companies for violations under the Egyptian Competition Law (“ECL“), this might indicate that the government will start implementing enforcement tools that existed in the law but remained unused for years to address market restraints.

What it means for you

The creation of this new committee adds an important enforcement mechanism against patent abuse in general and anti-competitive conduct in particular. According to the IP Law, the said committee is responsible for issuing compulsory licenses in a number of cases such as;

  1. For wider policy goals, such as the protection of health, environment and national security.
  2. In cases of emergency and necessity.
  3. Upon request of the Minister of Health in order to address situations where there is shortage of certain medications or where prices charged are excessive.
  4. In certain cases where the patent holder refuses to license the patent even though “suitable” conditions and terms were offered and a reasonable negotiating period passed unsuccessfully. In this case, the person seeking the patent license bears the burden to prove that it has seriously pursued and negotiated for the said license.
  5. If the patent holder abused its rights by charging excessive prices, limiting or refusing to supply a medication, committing anticompetitive practices. In many cases the compulsory license will be issued without prior discussions or negotiations with the patent holders.

Given the clear statement in the IP Law that anticompetitive practices are sufficient reasons for compulsory licensing together with the appointment of the Chairperson of the ECA on this committee, this indicates the close overlap between IP Law and the ECL.

Companies holding patents, especially those who may have a dominant position in their relevant markets, should carefully consider their market conduct. While the committee is responsible for issuing compulsory licenses in all sectors of the economy wherever relevant, it would not be a surprise that there would be a special focus on the pharmaceutical and medical sectors in particular. This is mainly because of the following;

  1. The IP Law itself when it comes to compulsory license refers to health and pharmaceuticals in a number of provisions.
  2. The increasing number of enforcement actions by the ECA and the Ministry of Health against pharmaceutical and medical sector companies.
  3. The ECA Chairman has previously expressed concerns that the pharmaceutical and medical sectors are among the sectors where there seems to be more tendency for anticompetitive practices to take place in Egypt.

Steps to take

Companies holding patents in general, and in particular those active in the pharmaceutical and medical industry, should pay attention to this development and note the following;

  • Revisit their pricing and distribution strategies in order to ensure that they are compliant with the ECL.
  • Ensure that prices charges are not excessive. While the ECL does not explicitly prohibit dominant persons from charging excessive prices, the IP Law provides a sufficiently clear basis upon which the ECA, through the committee, can intervene in order to address cases where patent holders are charging “excessive prices”.
  • Ensure the sufficient supply of the products in the Egyptian market and to quickly report any cases of shortages and their reasons, in order to avoid being caught under any of the clear restrictions and avoid being interpreted as an artificial shortage that justifies the compulsory license.
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Author

Mohamed ElFar is a counsel in Baker McKenzie's Cairo office.

Author

Hania Negm is a senior associate at Helmy, Hamza & Partners, Baker McKenzie Cairo. She focuses her practice on antitrust and competition law, international commercial law and trade, and compliance and investigations. Prior to joining the Firm, she worked at the Egyptian Competition Authority, where she was involved in numerous competition law cases across several sectors, such as pharmaceuticals, automotive, food and beverage, information and communication technology, sports media rights, and entertainment. She was also involved in assisting the committees drafting internal regulations and draft laws. She received an LLB from Cairo University's Faculty of Law in 2016 before receiving a Master 1 in Business Law from Universite Jean Moulin Lyon III in 2017 and a Master 2 in Public Business Law after that. Hania was admitted to the Egyptian Bar Association in 2018.

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