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What is a Compulsory License?

Mary McMahon
Updated Feb 19, 2024
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A compulsory license is permission granted by a government to use copyrighted or patented material without the consent of the party that holds the copyright or patent. When compulsory licenses are granted, the person using the material must pay a licensing fee established by the government in exchange for use of the material. Compulsory licensing is used to address market failures, where the demand for a product exceeds the supply that can realistically be produced by the manufacturer.

Governments do not have the ability to grant a compulsory license on everything. Specific regulations must be followed. As a general rule, such licenses are granted when it is determined that information, technology, and ideas that are normally protected would benefit the public and the person holding the patent or copyright is not using it appropriately. The government carefully evaluates cases where compulsory licenses are requested to determine whether or not the licensing would be appropriate and the holder of the patent or copyright is given an opportunity to appeal.

A classic situation where a compulsory license can come up is in the production of generic versions of expensive patented drugs for use in the developing world. In the international community, there is general agreement that people should not be deprived of access to lifesaving drugs. People with conditions like AIDS and tuberculosis, who need patented medications, may not be able to afford them. Thus, manufacturers may ship to developing nations in limited quantities because their drugs are not affordable and there is a small market as a result.

A pharmaceutical company in a developing nation can apply for a compulsory license that will allow it to make generic versions of patented drugs for distribution in its home country only. If it can demonstrate that the patented version is not accessible to people who need the drug, the government will grant the license and the company can begin producing affordable generics. This makes important medical treatments available for people who need them.

Compulsory licensing is also used to provide public radio and television stations with access to creative material, and in a variety of other situations where there would be a public benefit to licensing copyrighted or patented material. The law in each nation about compulsory licensing varies in terms of the kinds of material that can be subject to a compulsory license and how the licenses work. In all cases, mechanisms must be in place to pay for licensing fees and royalties, compensating the copyright or patent holder for use of the material. It is possible for these fees to be waived as an act of charity.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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