Compulsory licensing is when a government allows someone else to produce the patented product or process without the consent of the patent owner. It is one of the flexibilities on patent protection included in the WTO’s agreement on intellectual property — the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement.
For compulsory licensing, it’s when the generic copy is produced mainly for the domestic market, not for export.
The patent owner still has rights over the patent, including a right to be paid for the authorized copies of the products.
Compulsory licensing should be granted not only in emergency situation. The TRIPS Agreement does not specifically list the reasons that might be used to justify compulsory licensing.
Normally the person or company applying for a licence has to have tried to negotiate a voluntary licence with the patent holder on reasonable commercial terms. Only if that fails can a compulsory licence be issued.
Even when a compulsory licence has been issued, the patent owner has to receive payment as mentioned in TRIPS agreement, but TRIPS agreement does not define “adequate remuneration” or “economic value”.
Compulsory licensing must meet certain additional requirements: it cannot be given exclusively to licensees (e.g. the patent-holder can continue to produce), and it should be subject to legal review in the country.
The authorities in the country concerned will decide bout the licensee fees for the patent holder. The TRIPS Agreement says the patent owner must be given the right to appeal in that country as well.