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Question of the Day –


I am Jude Ogbeide, CEO of Ivory Mask Innovations Ltd, a mobile-phone technology
company registered in Nigeria. In February 2018, we developed BatteryBuddies, a
new technology that will enable mobile-phone users charge their batteries by
using the battery power of paired mobile phones, as long as both phones are by
the same manufacturer. We introduced BatteryBuddies to a Nigeria-based mobile-phone
manufacturer. They loved it. After getting all paperwork done and licensing
arrangements were concluded, the mobile-phone manufacturer launched a new
mobile phone powered with BatteryBuddies. 


On Christmas eve, TechFusion, a technology
lab, sent us a cease-and-desist letter, demanding that Ivory Mask Innovations
stop making, marketing, distributing, licensing, or selling BatteryBuddies in
Nigeria because it allegedly infringed on its patent in a similar
technology, PowerFusion 3000. TechFusion made the same demand to our
phone-manufacturing client. According to TechFusion, it developed tPowerFusion
3000 in 2014 and the invention was patented in December 2016. TechFusion
has threatened to take legal action against us if we failed to cooperate.

Because we have invested so much in BatteryBuddies, we had to contact 3 patent
experts to assess both inventions. After independent expert assessments, it
turned out—sadly—that indeed TechFusion had developed and patented the same
invention. Consequently, we decided to cooperate.

But here’s the problem we have: We applied to
TechFusion for licence but TechFusion refused to license its technology to us.
After another try, TechFusion eventually agreed but offered to license the
patented invention under most unreasonable terms, including a most ridiculous
licence fee. Meanwhile, since TechFusion got patent for PowerFusion 3000
in Nigeria, the product has remained unused in the mobile-phone industry
in the country. Yet, TechFusion has prevented us from manufacturing BatteryBuddies.
This is unfair and most frustrating! Under Nigeria’s patent law, if a
patentee refuses to grant licence on reasonable terms, does the applicant have
any remedy?

Answer

Dear Mr Ogbeide


The answer is YES; applicant for a licence to a patented invention who is
unable to obtain from the patentee a licence on reasonable terms may
apply to the Federal High Court for a compulsory licence. If the
court determines that there is a ground for granting a compulsory licence in
accordance with the requirements of Nigeria’s Patents and Designs Act, it
would grant it.


Compulsory licences are lawful under the Patents and Designs Act.

The drafters of the Patents and Designs Act
contemplate that there may be a situation where there is need for compulsory
licences. Section 11 of the Act allows compulsory licenses to be granted.
Application for and grant of a compulsory licence is governed by the
provisions of the First Schedule to the Act.

By virtue of Part I paragraph 1 of the First
Schedule of the Act, a person may apply to the Federal High Court for the grant
of a compulsory licence. But an applicant for a compulsory licence is not
qualified to apply for one until (a) a period of 4 years has expired after
the patent application was filed or (b) a period of 3 years has expired after
the patent was granted, whichever period comes first.

From the above, Ivory Mask Innovations Ltd is
not yet qualified to apply for a compulsory licence for TechFusio’s PowerFusion
3000 patent. This is because the patent was granted in December 2016, one year
shot of the 3-year period required for filing for compulsory licences after the
patent was granted. But if TechFusion filed for the patent more than 4 years
ago, Ivory Mask Innovations Ltd is qualified to apply.

Therefore, based on the year the patent as
granted, Ivory Mask Innovations Ltd may apply for a compulsory licence by
December 2019.


Apart from the time factor above, there are 4 separate statutory grounds for
a grant of compulsory licence in Nigeria.

Compulsory licences are granted by the
Federal High Court upon an applicant’s fulfillment of the statutory
requirements under Part I paragraph 1(a)-(d) of the First Schedule of the Act.
By virtue of this provision, the court has the power to grant a compulsory
licence “on one or more of the following grounds”:

The patented invention, capable of being
worked in Nigeria, has not been so worked [emphasis ours];

1.      The existing degree
of working of the patented invention in Nigeria does not meet on reasonable
terms the demand for the product;

2.      The working of the
patented invention in Nigeria is being hindered or prevented by the importation
of the patented article; and

3.      By reason of the
refusal of the patentee to grant licences on reasonable terms, the
establishment or development of industrial or commercial activities in Nigeria
is unfairly and substantially prejudiced [emphasis ours].

These for grounds are not cumulative
requirements. Once Ivory Mask Innovations Ltd can prove one of the grounds, the
court is required to grant the compulsory licence.


Of the 4 grounds above, 2 grounds may favour Ivory Mask Innovations Ltd if
it applies to the court for a compulsory licence.

To convince the court, Ivory Mask Innovations
Ltd must either prove that TechFusion has failed to work the patented invention
or has the establishment or development of industrial or by refusing to grant
licences on reasonable terms, TechFusion’s refusal will unfairly and
substantially prejudice the establishment or development of industrial or
commercial activities in Nigeria.

First, regarding the first ground i.e working
the patented invention, paragraph 14 of the First Schedule to the Act directs that
“references to the working of a patented invention” are to be construed to
mean: “(a) the manufacture of a patented article; or (b) the application of a
patented process; or (c) the use in manufacture of a patented machine, by an
effective and serious establishment existing in Nigeria on a scale which is
adequate and reasonable in the circumstances.” If all TechFusion has got is a
patent and not the manufactured product 2 years after being granted patent, the
court may treat this as a ground for granting a compulsory licence.

Second, regarding the last ground i.e
TechFusion’s refusal to licence the patented invention in reasonable terms, the
court will form an opinion on whether the terms are indeed reasonable. If found
unreasonable, the court is required to find whether by reason of the
unreasonable terms, industrial or commercial activities in Nigeria concerning
the establishment or development of the patented invention have been unfairly
and substantially prejudiced.

If the court founds that TechFusion has
failed on either of the 2 grounds discussed above, it will grant a compulsory
licence to Ivory Mask Innovations Ltd on the court’s terms.

Patents are granted by the state based on
valuable consideration by the patentee—disclosure of all the details of how the
invention works. For this reason, the same state is not in a hurry to grant
compulsory licences except the patentee’s monopoly conflicts with public
interest—industrialization and commercialization.

Before obtaining a grant of patent, a patentee
must have typically invested a lot of resources into this. Also, the patentee
may have structured its proprietary business in a way that enables him or her
exploit the patent exclusively without any licences. The patentee may want to
be a category-king. Patent law protects this proprietary and commercial
interest. And because patents are exclusive rights, they necessarily create
monopolies.

So by twisting the hands of a patentee with
the force of law to issue a compulsory licence to an interested person, it may
destroy the exclusive rights that a patentee is otherwise entitled to. The
effect of this compulsory licence portend a great risk to the patentee’s
legitimate expectations and commercial interest.

This is why compulsory licences are only
granted by the court after it has considered that at least one of the grounds
for this grant is present in any application.

For legal advice and assistance with
negotiations with TechFusion and application for a compulsory licence, consult
your IP lawyer or law firm.

IP ABC