Mandatory Patent Licenses Under Section 308 of the Clean Air Act

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 95

[FRL-5059-7]

Mandatory Patent Licenses Under Section 308 of the Clean Air Act

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: EPA proposes to issue a rule under section 308 of the Clean

Air Act (CAA) that will establish the policies and procedures EPA will

follow prior to applying to the Attorney General for a mandatory

license under a patent covering an air pollution control technology.

Section 104(b) of the North American Free Trade Implementation Act

requires EPA to issue regulations conforming CAA section 308 with

article 1709 of the North American Free Trade Agreement (NAFTA). The

policies and procedures defined in the proposed rule are designed to

ensure that EPA's implementation of CAA section 308 will conform with

the requirements of NAFTA article 1709(10).

DATES: Written comments on this proposed rule must be received by

October 28, 1994.

ADDRESSES: Comments should be addressed to: Thomas Eagles, Senior

Policy Analyst (Mail Code 6103), Office of Air and Radiation, U.S.

Environmental Protection Agency, 401 M Street SW., Washington, DC

20460. Phone (202) 260-5580.

FOR FURTHER INFORMATION CONTACT: Thomas Gorman, Patent Counsel (Mail

Code 2379), Office of General Counsel, U.S. Environmental Protection

Agency, 401 M Street SW., Washington, DC 20460. Phone: (202) 260-1339.

SUPPLEMENTARY INFORMATION:

I. Authority

This amendment is promulgated under the authority of CAA section

308, as amended, 42 U.S.C. 7608, and the North American Free Trade

Agreement Implementation Act, Public Law No. 103-182, section 104, 107

Stat. 2057, 2064 (1993).

II. Background

Section 308 of the Clean Air Act provides for mandatory licensing

of patented technologies needed to meet the requirements of the Clean

Air Act. Under section 308, the United States can require the owner of

a patented air pollution control technology to permit other parties to

practice the technology in exchange for a reasonable royalty set by a

Federal court. In order to compel the licensing of a patent under

section 308, the EPA Administrator must ask the Attorney General to

certify to a Federal district court that the following conditions are

satisfied:

(a) The patent must be necessary for compliance with the emission

standards of the CAA;

(b) The patent right must be actively in use or intended to be

used;

(c) No reasonable alternatives to licensing the patent can exist;

and

(d) Failure to license the patent may cause reduced competition or

monopoly conditions in any area of trade.

Upon certification of the above conditions to a Federal district

court by the Attorney General, the court may then order the patent

holder to license the patent under terms and conditions determined by

the court after a hearing.

Chapter 17 of the NAFTA addresses intellectual property issues

generally and article 1709 addresses patents specifically. NAFTA

article 1709 promotes the availability of patent protection for a broad

range of inventions and also limits the scope of permissible violations

of patent rights. The latter function is performed by paragraph 10 of

article 1709, which sets conditions for violating a patent holder's

right to decide the conditions for practice of the holder's patent.

NAFTA article 1709(10) sets specific conditions that must be met by

the compulsory patent licensing statutes of any member country. The

conditions are as follows:

(a) Authorization of each compulsory license of a patent must be

considered on the individual merits;

(b) Any proposed compulsory licensee already must have made efforts

to obtain authorization from the patent holder;

(c) The scope and duration of an authorized compulsory patent

license must be limited;

(d) An authorized compulsory patent license must be non-exclusive;

(e) An authorized compulsory patent license must be non-assignable;

(f) An authorized compulsory patent license must be predominately

for supply of the domestic market;

(g) The authorization of the compulsory patent license must be

terminable when the circumstances that led to the authorization cease

to exist;

(h) Patent holders must be paid adequate compensation;

(i) Authorization decisions must be subject to judicial or other

independent review;

(j) Compensation rates must be subject to judicial or other

independent review;

(k) When an authorized compulsory use is necessary to remedy a

practice determined after judicial or administrative process to be

anti-competitive, a member country is allowed greater latitude in

applying conditions (a)-(j), including noncompliance with conditions

(b) and (f); and

(l) Authorization of the use of a patent in order to permit

exploitation of another patent shall not be granted except as a remedy

for an adjudicated violation of laws directed against anti-competitive

practices.

No direct conflict exists between NAFTA article 1709(10) and CAA

section 308. However, section 308 does not address a number of the

NAFTA conditions. The following proposed rule establishes the policies

and procedures that EPA will follow before applying to the Attorney

General, pursuant to CAA section 308, for a mandatory license under a

patent covering an air pollution control technology. The procedures in

the proposed rule will ensure that EPA's implementation of CAA section

308 will conform to article 1709(10) of the NAFTA.

Section 95.1 of the proposed rule sets forth definitions of a

number of terms used in the rule. Section 95.2 of the proposed rule

identifies who is entitled to petition the EPA for a mandatory patent

license under section 308 and the required contents of such petitions.

Section 95.3 of the proposed rule identifies findings that EPA will

have to make prior to making application to the Attorney General for a

mandatory patent license under CAA section 308. These findings reflect

the requirements of CAA section 308 and NAFTA article 1709(10). Section

95.4 of the proposed rule sets forth certain limitations that will be

included in all mandatory patent licenses for which EPA makes

application to the Attorney General under CAA section 308. These

limitations are in accord with the requirements of CAA section 308 and

NAFTA article 1709(10).

III. Procedural Requirements

A. Review under Executive Order 12866

Under Executive Order 12866 (58 FR 51735 (October 4, 1993)), the

EPA must determine whether the regulatory action is ``significant'' and

therefore subject to review by the Office of Management and Budget

(OMB), and the requirements of the Executive Order. The Order defines

``significant regulatory action'' as one that is likely to result in a

rule that may: (1) Have an annual effect on the economy of $100 million

or more or adversely affect in a material way the economy, a sector of

the economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities; (2) create a serious inconsistency or otherwise interfere

with an action taken or planned by another agency; (3) materially alter

the budgetary impact of entitlement, grants, user fees, or loan

programs, or the rights and obligation of recipients thereof; or (4)

raise novel legal or policy issues arising out of legal mandates, the

President's priorities, or the principles set forth in the Executive

Order.

Pursuant to the terms of Executive Order 12866, it has been

determined that this rule is not ``significant'' because none of the

listed criteria apply to this action. Consequently, this action was not

submitted to OMB for review under Executive Order 12866.

B. Review under the Regulatory Flexibility Act

This proposed rule was reviewed under the Regulatory Flexibility

Act of 1980, Pub. L. 96-354, which requires preparation of a regulatory

flexibility analysis for any rule which is likely to have significant

economic impact on a substantial number of small entities. Pursuant to

section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), EPA

certifies that this rule will not have a significant economic impact on

a substantial number of small entities. The proposed rule codifies the

existing procedures for application of CAA section 308 and imposes no

new impacts on large or small entities. Therefore, no regulatory

flexibility analyses has been prepared.

C. Review under the Paperwork Reduction Act

The information collection requirements in this proposed rule have

been submitted to the Office of Management and Budget (OMB) under the

requirements of the Paperwork Reduction Act, 44 U.S.C. 3501, et seq. An

Information Collection document has been prepared by EPA (ICR No.

1714.01), and a copy may be obtained from Sandy Farmer, Information

Policy Branch, EPA Mail Code 2136, 401 M St., SW., Washington, DC

20460, or by calling (202) 260-2740.

Public reporting burden for this collection of information would be

a one-time burden for each petitioner. The burden was estimated on the

basis of the number of hours needed to complete a single petition,

along with the associated cost. Completing a petition was estimated to

require 21 hours at a cost of $1482. This includes time for reviewing

instructions, gathering materials supporting the patent, identifying

other interested parties, and composition of a statement of facts upon

which the petition is based.

Send comments regarding the burden estimate or any other aspects of

this collection of information, including suggestions for reducing this

burden, to: Chief, Information Policy Branch, 2136, U.S. Environmental

Protection Agency, 401 M Street SW., Washington, DC 20460, and to the

Office of Management and Budget, Washington, DC 20503, marked

``Attention: Desk Officer for EPA.'' The final rule will respond to any

OMB or public comments on the information collection requirements

contained in this proposal.

IV. Public Comment

Interested persons are invited to submit comments concerning the

proposed rule set forth in this notice. Comments should be submitted in

writing to the address indicated in the ADDRESSES section of this

document, and must be received by October 28, 1994. All written

comments received within the comment period will be carefully

considered prior to publication of this proposed rule as a final rule.

All comments received will be available for public inspection in

the EPA Air Docket, room M1500, U.S. Environmental Protection Agency,

401 M St. SW., Washington, DC 20460, between the hours of 9 a.m. and 4

p.m., Monday through Friday, except Federal holidays. Any person

submitting information which that person believes to be confidential

and which may be exempt from public disclosure should submit one

complete copy, as well as an additional copy from which the information

claimed to be confidential has been deleted. EPA reserves the right to

determine the confidential status of the information or data and to

treat it according to its determination. The applicable procedures for

handling information that has been submitted in a document and is

claimed as exempt from public disclosure, are set forth in 40 CFR part

2.

List of Subjects in 40 CFR Part 95

Environmental protection, administrative practice and procedure,

Air pollution control, Inventions and patents, Patent licensing, North

American Free Trade Agreement (NAFTA), Reporting and recordkeeping

requirements.

Dated: August 22, 1994.

Carol M. Browner,

Administrator.

For the reasons set out in the preamble, 40 CFR part 95 is proposed

to be added as follows:

PART 95--MANDATORY PATENT LICENSES

Sec.

95.1 Definitions.

95.2 Petition for mandatory license.

95.3 Findings prior to application to Attorney General.

95.4 Limitations on mandatory licenses.

Authority: 42 U.S.C. 7608; and Sec. 104, Pub. L. 103-182, 107

Stat. 2057, 2064.

Sec. 95.1 Definitions.

(a) As used in this part, all terms not defined in this section

shall have the meaning given them by the Act.

(b) Act means the Clean Air Act, as amended (42 U.S.C. 7401-7671).

(c) Agency means the Environmental Protection Agency.

(d) Administrator means the Administrator of the Environmental

Protection Agency.

Sec. 95.2 Petition for mandatory license.

(a) Any party required to comply with sections 111, 112 or 202 of

the Act (42 U.S.C. 7411, 7412 or 7521) may petition to the

Administrator for a mandatory patent license pursuant to section 308 of

the Act (42 U.S.C. 7608), under a patent that the petitioner maintains

is necessary to enable the petitioner to comply with sections 111, 112

or 202 of the Act.

(b)(1) Each petition shall be signed by the petitioner and shall

state the petitioner's name and address. If the petitioner is a

corporation, the petition shall be signed by an authorized officer of

the corporation, and the petition shall indicate the state of

incorporation. Where the petitioner elects to be represented by

counsel, a signed notice to that effect shall be included with the

petition at the time of filing.

(2) Each petition shall include a copy of the patent under which a

mandatory patent license is sought. The petition shall identify all

current owners of the patent and shall include a copy of all assignment

documents relevant to the patent that are available from the United

States Patent and Trademark Office.

(3) Each petition must identify any person whose interest the

petitioner believes may be affected by the grant of the license to

which the petition is directed.

(4) Each petition must contain a concise statement of all of the

essential facts upon which it is based. No particular form of statement

is required. Each petition shall be verified by the petitioner or by

the person having the best knowledge of such facts. In the case of

facts stated on information and belief, the source of such information

and grounds of belief shall be given. The statement of facts shall

include the following:

(i) An identification of the provisions of the Act and/or

regulations thereunder that the petitioner maintains petitioner will be

able to comply with if the petitioner is granted the patent license

that is the subject of the petition;

(ii) An identification of the nature and purpose of the

petitioner's intended use of the patent license;

(iii) An explanation of the relationship between the patented

technology and the activities to which petitioner proposes to apply the

patented technology, including an estimate of the effect on such

activities stemming from the grant or denial of the patent license;

(iv) A summary of facts demonstrating that the patent under which a

mandatory patent license is sought is being used or is intended for

public or commercial use;

(v) An explanation of why a mandatory patent license is necessary

for the petitioner to comply with the requirements of sections 111, 112

or 202 of the Act, and why the patented technology is not otherwise

available;

(vi) An explanation of why there are no other reasonable

alternatives for accomplishing compliance with sections 111, 112 or 202

of the Act;

(vii) An explanation of why the unavailability of a mandatory

patent license may result in a substantial lessening of competition or

a tendency to create a monopoly in any line of commerce in any section

of the United States;

(viii) A summary of efforts made by the petitioner to obtain a

patent license from the owner of the patent, including the terms and

conditions of any patent license proposed by petitioner to the patent

owner; and

(ix) The terms, if any, on which the owner of the patent has

proposed to grant the petitioner a patent license.

(5) Each petition shall include a proposed patent license that

states all of the terms and conditions that the petitioner proposes for

the patent license.

(6) Petitions shall be addressed to the Assistant Administrator for

Air and Radiation, Mail Code 6101, U.S. Environmental Protection

Agency, Washington, DC 20460.

(c) Petitions that do not include all of the information required

in paragraph (b) of this section shall be returned to the petitioner.

The petitioner may supplement the petition and resubmit the petition.

(d) If the Administrator, or the Administrator's designee, finds

that the criteria in Sec. 95.3 are not met, or otherwise decides to

deny the petition, a denial of the petition shall be sent to the

petitioner, along with an explanation of the reasons for the denial.

(e) If the Administrator, or the Administrator's designee, finds

that the criteria in Sec. 95.3 are met and decides to apply to the

Attorney General for a patent license under section 308 of the Act,

notice of such application shall be given to the petitioner, along with

a copy of the application sent to the Attorney General.

Sec. 95.3 Findings prior to application to Attorney General.

The Administrator, or the Administrator's designee, may apply to

the Attorney General for a mandatory patent license pursuant to section

308 of the Act (42 U.S.C. 7608) either in response to a petition under

Sec. 95.2 or on the Administrator's or designee's own initiative, only

after expressly finding that each one of the following mandatory

criteria is met:

(a) The application is for a patent license covering no more than

one patent;

(b) The party to whom the proposed patent license is to be granted

has presented the Administrator or designee with evidence that such

party has made reasonable efforts to obtain a patent license from the

patent owner with terms similar to the license terms to be proposed in

the application to the Attorney General;

(c) The patent under which a patent license is sought in the

application to the Attorney General is being used or is intended for

public or commercial use;

(d) The mandatory patent license is necessary for a party to comply

with the requirements of sections 111, 112 or 202 of the Act (42 U.S.C.

7411, 7412 or 7521);

(e) The patented technology is not otherwise reasonably available,

and there are no other reasonable alternatives for accomplishing

compliance with sections 111, 112 or 202 of the Act (42 U.S.C. 7411,

7412 or 7521); and

(f) The unavailability of a mandatory patent license may result in

a substantial lessening of competition or a tendency to create a

monopoly in any line of commerce in any section of the United States.

Sec. 95.4 Limitations on mandatory licenses.

(a) If the Administrator, or the Administrator's designee, decides

to apply to the Attorney General for a mandatory patent license in

accordance with Sec. 95.3, the application shall include a proposed

patent license with the following limitations:

(1) The scope and duration of the patent license shall be limited

to that necessary to permit the proposed licensee to comply with the

requirements of the Act;

(2) The patent license shall be nonexclusive;

(3) The patent license shall be non-assignable, except with that

part of the enterprise or goodwill that enjoys the license;

(4) The patent license shall be for use of the licensed technology

in the United States only;

(5) The patent license shall extend only to those uses necessary to

enable the licensee to comply with sections 111, 112 or 202 of the Act

(42 U.S.C. 7411, 7412 or 7521);

(6) The patent license shall provide for termination, subject to

adequate protections of the legitimate interests of the licensed party,

when the circumstances that made the compulsory patent license

necessary cease to exist and are unlikely to recur; and

(7) The patent license shall provide for adequate remuneration that

takes into account the economic value of the license.

(b) The Administrator, or the Administrator's designee may decide

as appropriate to include additional conditions, terms or limitations

on the scope of the patent license for which application is made to the

Attorney General.

[FR Doc. 94-21189 Filed 8-26-94; 8:45 am]

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