Compulsory Licenses in Light of Foreign Investment Treaties

Habiba, Saeed; Chalabi, Mohammad

doi:10.48308/eclr.2025.235724.1064

Compulsory Licenses in Light of Foreign Investment Treaties

Document Type : Original Article

Authors

Saeed Habiba ¹ ^¶

Mohammad Chalabi ²

¹ Professor of Law, Faculty of Law & Political Science, University of Tehran, Tehran.Iran Corresponding Author Email: habiba@ut.ac.ir

² Ph. D. Candidate, Faculty of Law & Political Science, University of Tehran, Tehran.Iran

https://doi.org/10.48308/eclr.2025.235724.1064

Abstract

Intellectual property constitutes one of the key protected assets of foreign investors within host countries, as recognized in most international investment treaties. These treaties generally include provisions safeguarding the intellectual property rights of investors. However, such protections are not absolute; they may be subject to limitations imposed by the public interests of the host states. Incorporating exemption clauses into international investment agreements exemplifies such limitations. According to these clauses, actions undertaken by host countries to safeguard public interests are not deemed breaches of the investor’s rights. In practice, host countries often invoke such exemption clauses, frequently through measures like issuing compulsory licenses, which impose restrictions on the intellectual property rights of investors. Such actions may be interpreted by investors as expropriation of their intellectual property, potentially giving rise to claims for compensation. This article examines whether, in accordance with the content of foreign investment treaties, international conventions, and domestic laws pertaining to intellectual property, a foreign investor is legally entitled to such claims. It also analyzes the likelihood of success, considering possible defenses that the host country might raise. Employing an analytical-descriptive methodology, this study concludes that the determination of such claims largely hinges on two factors: (1) the amount of royalty paid to the inventor, and (2) the specific language of exemption clauses within the investment treaties.

Keywords

foreign investment treaties

compulsory licenses

exception clause

expropriation

Intellectual property

References

Books
1. Dolzer, Rudolf and Christoph, Schreuer, Principles of International Investment Law, Translator: Seyyed Qasem Zamani and Behaziin Hasibi, 1^st Edition, Tehran: Shahr Danesh Legal Studies and Research Institute, 2012. (in Persian)
2. Habiba, Saeed and Mahdi, Moalla, Legal Protection of Biotechnological Inventions, 1^st edition, Tehran: Samt Publications, 2017. (in Persian)
3. Hasibi, Behazin, Government and Foreign Investors: International Standards, 1^st edition, Tehran: Shahr Danesh Legal Studies and Research Institute, 2011. (in Persian)
4. Vivas-Eugui, David. Regional and Bilateral Agreements and a TRIPS-plus World: The Free Trade Area of The Americas (FTAA), Quaker United Nations Office (QUNO), 2003.
Articles
1. Bahmaei, Mohammad Ali and Habib, Sabzevari, "Legal Nature of Exception Clauses as Treaty-Internal Limitation on the Scope of the Substantive Obligations of BITs and its Relevant Effects in International Investment Law," International Law Review, Vol. 39, No. 67, 2022, pp 47-84. (in Persian)
2. Bahmaei, Mohammad Ali and Ali, Shahbazian, "Protecting the Right to Health in Investment Claims Arising from Pandemics with Particular Attention to Covid-19," Legal Research Quarterly, 23 LAW and COVID- 19, Vol. 23, 2020, pp 245-275. (in Persian)
3. Bird, R., & Cahoy, D. R, “The Impact of Compulsory Licensing on Foreign Direct Investment: a Collective Bargaining Approach”, American Business Law Journal, 45, No. 2, 2008, pp 283-330.
4. Boie, Betram, “The Protection of Intellectual Property Rights through Bilateral Investment Treaties: Is there a TRIPS-plus Dimension”, Swiss National Center of Competence in Research, 19, 2010, pp 1- 59.
5. Christie, G. G. “What Constitutes Taking of Property under International Law”, British Year Book of International Law, Vol. 38, 1962, pp 307-338.
6. Correa, M.” Investment Protection in Bilateral and Free Trade Agreements: Implications for the Granting of Compulsory Licenses”, Michigan Journal of International Law, Vol. 26, No. 1, 2004, pp 331-354.
7. Ghasemi, Gholam Ali and Mohammad, Akefi Ghaziani, "Legal Challenges to the Protection of Foreign Investment in light of States' International Commitment to Control the Outbreak of Infectious Diseases; A Case Study on Covid-19," Interdisciplinary Studies in the Humanities, Vol. 13, No. 2, 2021, pp 31-60. (in Persian)
8. Gibson, C.” A Look at the Compulsory License in Investment Arbitration: The Case of Indirect Expropriation. Am”, Int'l L. Rev, Vol. 25, No. 3, 2010, pp 357-422.
9. Habibzadeh, Tavakol and Afifeh, Gholami, "Foreign Investment Contracts and Scope of Host State Commitments Arising From Treaty," Public Law Researsh, Vol. 18, No. 51, 2016, pp 81-109. (in Persian)
10. Jafarzade, Mirghasem and Soroush, Falahati,"Legal Nature of Compulsory Licensing under Patent Law: Regulatory Measure or Expropriation?" Public Law Research, Vol. 24, No. 75, 2022, pp 149-181. (in Persian)
11. Kasnavi, Shadi, "Investor-State Dispute Settlement in Intellectual Property Infringement," Iranian Journal of Trade Studies, Vol. 24, No. 93, 2019, pp 165-194. (in Persian)
12. Niavarani, Saber and Ehsan Javid "The Right to Access to Essential Drugs Within the Framework of TRIPS Agreement and the Challenge of Protection of International Human Right to Health," International Law Review, Vol. 33, No. 54, 2016, pp 29-58. (in Persian)
13. Pantopoulou, Elen, “The Status and Legal Effect of Compulsory License in Investment Law”, International Journal of Law (Jol), Vol. 1, No. 1, 2019, pp 33-46.
14. Ranjan, P, Issuance of Compulsory Patent Licenses and Expropriation in Asian BITs and FTA Investment Chapters: A Study of India, China, Malaysia and Thailand. The Future of Asian Trade Deals and IP Hart Publishing, Oxford, 2018, pp 1-20.
15. Ranjan, Prabhash.” Compulsory Licenses and ISDS in Covid-19 times: Relevance of the New Indian Investment Treaty Practice”, Journal of Intellectual Property Law & Practice, Vol. 16, No.7, 2021, pp 748-759.
16. Rezaee, Ali, "The Non-Precluded Measure Clause in Foreign Investment Treaties: Concept, Bases and Challenges," The Judiciarys Law Journal, Vol. 85, No. 113, 2021, pp 131-159. (in Persian)
17. Sadeghi, Mahmoud and Mansour, Khakpour, “Reasons for Granting Compulsory Licenses to Use Intellectual Property Rights ", Humanities Modarres Quarterly, Vol. 11, No. 4, 2007, pp 131-164. (in Persian)
18. Shahbazian, Ali "Settlement of Investment Disputes Arising From Pandemics, Especially Covid-19, Relying on the Protection of the Interests of the Host State," Journal of Legal Studies, Vol. 13, No. 4 , 2021, pp 234-262. (in Persian)
19. Teimoori, Mohammad Sadegh, Laya Joneydi, Mohammad Saghri and Reza Abbasian,"Indirect Expropriation of Foreign Investors; An Investigation to Iran and International law," Private Law Research,Vol. 7, No. 24, 2018, pp 9-36. (in Persian)
20. Ziaee, Yaser and Saeedeh Javadi, "Protection of Intellectual Property in International Foreign Investment Law," Journal of Legal Studies, Vol. 11, No. 2, 2019, pp: 127-155. (in Persian)
21. Zwolankiewicz, A,” The Brave New World of Foreign Investment in the Wake of Covid-19 Pandemic: Current Situation and Potential Disputes”, CIFILE Journal of International Law, Vol. 2, No. 4, 2021, pp 1-25.