Mandatory Patent Licenses Under Section 308 of the Clean Air Act  

[Federal Register: December 30, 1994]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 95

Mandatory Patent Licenses Under Section 308 of the Clean Air Act

AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.


SUMMARY: On occasion, a party attempting to comply with a standard of 
the Clean Air Act [CAA] may be unable to meet the standard without 
resort to a patented technology. CAA section 308 provides a mechanism 
by which such a non-complying party may obtain a patent license where 
it has been unsuccessful in its attempts to obtain a license on its 
own. Under CAA section 308, the United States may require the owner of 
the patented technology to grant the non-complying party a patent 
license in exchange for a reasonable royalty if the patented technology 
is necessary to meet the requirements in certain sections of the CAA.
    The North American Free Trade Agreement (NAFTA) imposes certain 
limits on the ability of the United States to force patent owners to 
grant licenses under their patents. Section 104(b) of the North 
American Free Trade Implementation Act requires EPA to issue a 
regulation conforming CAA section 308 with the mandatory patent 
licensing restrictions found in NAFTA article 1709(10).
    EPA is issuing this rule to ensure that EPA's implementation of CAA 
section 308 conforms with the requirements of NAFTA article 1709(10). 
The rule establishes the policies and procedures EPA will follow prior 
to applying to the Attorney General for a mandatory license under a 
patent covering a technology necessary to enable compliance with the 
new stationary sources standards, hazardous air pollutants standards, 
or motor vehicle emission standards of the CAA.


EFFECTIVE DATE: January 30, 1995.


ADDRESSES: Materials relevant to this rulemaking are contained in EPA 
Air Docket No. A-94-51: Environmental Protection Agency, 401 M Street, 
SW., Washington, DC 20460. The Air and Radiation Docket and Information 
Center is located in room M-1500, Waterside Mall (Ground Floor) 
Environmental Protection Agency, 401 M Street, SW., Washington, DC 
20460. Dockets may be inspected from 9 a.m. to 4 p.m., Monday through 
Friday, except Federal holidays. A reasonable fee may be charged for 
copying docket materials.


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 rule 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 certain CAA requirements. Under 
section 308, the United States can require the owner of a patented 
technology that is necessary to enable another party's compliance with 
certain limitations of the Clean Air Act to permit the other party to 
practice the patented 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 standards 
of the CAA sections 111, 112 or 202;
    (b) The patent right must be actively in use or intended for public 
or commercial use and not otherwise reasonably available;
    (c) No reasonable alternatives to licensing the patent can exist 
for meeting the specified CAA standards; 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 predominantly 
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 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 a technology necessary to enable compliance with CAA 
sections 111, 112 or 202. The procedures in the rule ensure that EPA's 
implementation of CAA section 308 will conform to article 1709(10) of 
the NAFTA.
    Section 95.1 of the rule sets forth definitions of a number of 
terms used in the rule. Section 95.2 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 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 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).
    EPA published this rule in a notice of proposed rulemaking 
published on August 29, 1994 (59 FR 44390). EPA received three comments 
in response to the notice of proposed rulemaking. Each of the three 
comments expressed the concern that the proposed rule might be used to 
require mandatory licensing of patented products or processes that are 
only marginally related to reducing air pollution. Each comment 
suggested that the language of the proposed rule should be amended to 
state that mandatory patent licenses under CAA section 308 may be 
required only for patents relating to air pollution control.
    This rule is not intended to limit the technologies for which 
mandatory patent licenses may be sought under CAA section 308 more than 
is already provided in CAA section 308. That is, the technology must be 
necessary to enable compliance with CAA section 111 (new stationary 
sources standards), section 112 (hazardous air pollutants), or section 
202 (motor vehicle emission standards). However, EPA notes that under 
the rule, the EPA Administrator may apply to the Attorney General for a 
mandatory patent license pursuant to CAA section 308 only after 
expressly finding that the patented technology is not otherwise 
reasonably available, and that there are no other reasonable 
alternatives for accomplishing compliance with CAA section 111, 112 or 
202. These requirements help ensure that a mandatory patent license 
will not be ordered pursuant to this rule where the patent is only 
marginally related to meeting the standards of the CAA.


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 entitlements, grants, user fees, or loan 
programs, or the rights and obligations 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 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 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.


D. Review Under the Paperwork Reduction Act


    The information collection requirements in this 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 Street SW., Washington, DC 
20460, or by calling (202) 260-2740.
    The 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 license, identifying other interested 
parties, and composition of a statement of facts upon which the 
petition is based. EPA received no comments regarding this information 
collection requirement. ICR No. 1714.01 was approved by OMB, Control 
Number 2060-0307, on October 3, 1994. Unless renewed, ICR No. 1714.01 
will expire on October 31, 1997.


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.