When Patents Meet National Security

When Patents Meet National Security: Compulsory Licensing in Aerospace and Defence

Article Produced by Aerospace New Zealand Business Plus Associate, James & Wells.

By Jonathan Lucas and Hemi Jones

New Zealand’s aerospace sector is built on cutting-edge innovations, from rockets to autonomous aircraft. The public might have urgent need of some of these technologies during times of crisis like wars or pandemics. But what happens when critical tech is patented and not made available for public use when it’s critically needed? A legal mechanism called compulsory licensing applies here. As defined by the World Trade Organization (WTO), it allows a government to authorise use of a patented invention without the owner’s permission[1]. This is typically only used during emergencies or when the public interest demands it. It can be thought of as a safeguard, not a shortcut, ensuring access to vital technology when normal licensing fails. It’s a last-resort mechanism, but one that recognises intellectual property (IP) rights should never become a barrier to national security or public good.

Balancing Patent Rights and Public Interest in NZ and Australia

Under normal circumstances, patents promote innovation by giving inventors exclusive rights for a limited time in exchange for disclosing how an invention works so that the public can benefit from its use once the period of exclusivity is over. In addition, the inventor is expected to supply the invention to the market on reasonable terms, and there are mechanisms to enable use of the invention by others if the inventor does not do so.

In New Zealand, the Patents Act 2013 allows anyone to apply to the High Court for a compulsory licence once a patent has been in force for three years. To succeed, the applicant must show the invention is not being supplied in New Zealand or not on reasonable terms[2]. In other words, if someone holds a patent on a vital aerospace component but refuses to sell or license it fairly, another party can ask the court to grant permission to make or use it. The court considers factors like unmet demand and whether the applicant first made reasonable efforts to obtain a commercial licence from the patent owner [3].

Australia’s approach is similar, but with extra conditions. The applicant must show demand is not being met, efforts were made to obtain a licence, and that authorising the use is in the public interest[4]. For example, if the Defence Force needed a drone technology that was not being supplied, for instance, the government or a third party could seek permission to use it. In both countries, the patent owner must be paid compensation, usually determined by the court, if a compulsory licence is granted.

These licences are extremely rare. Australia has never had a court grant one, and New Zealand has no reported decisions either. Often, the existence of the law encourages patent holders to cooperate rather than risk a court order. For aerospace companies, this means continuing to make your products available and negotiating licences on fair terms should be enough to avoid a compulsory licence scenario. The law acts more as a backstop, a reminder that private IP rights should not block public needs.

Crisis Scenarios: Crown Use and Emergency Powers

In times of crisis, such as wars or pandemics, governments need faster options. New Zealand’s Patents Act empowers the government to use any patented invention for the services of the Crown without the patent holder’s permission. In emergencies, this power expands further, allowing use for any purpose necessary to avoid prejudice to New Zealand’s security or defence. For example, if the country needed to deploy a patented navigation system urgently, the government could step in. The patent owner would still be compensated but could not stop the use.

Australia updated its own laws in 2020 to allow a Minister to approve the use of a patent during an emergency, without prior negotiation[5]. These emergency powers run alongside the regular compulsory licence process and provide a quicker alternative. Again, compensation is determined later by the court, ensuring fairness.

The war in Ukraine illustrates how countries may override patents during conflict. Ukraine explored options to issue compulsory licences to access medicines amid disrupted supply chains[6]. Conversely, Russia issued a decree permitting unlicensed use of foreign patented technologies by its defence sector[7]. This was widely regarded as breaching global IP norms, but it highlighted the same core principle: in emergencies, nations prioritise security and public welfare over IP exclusivity.

If New Zealand found itself in a similar situation, for instance needing a radar system from a foreign company that refused to supply it, compulsory licensing or Crown use could provide a legal route to access it. International agreements recognise that in wartime or emergencies, countries can bypass normal patent rules to protect themselves. In short, when lives or national security are at stake, governments have tools to act.

What it Means for Kiwi Aerospace Innovators

For innovative companies, strong IP portfolios attract investment and enable commercial success. Compulsory licensing does not change that; it only applies in exceptional situations and, to an extent, is an obscure aspect of IP law that is of academic interest only. In everyday business, it is still crucial to use and license patents reasonably, particularly within the domestic market, to avoid legal risk.

Fortunately, New Zealand’s aerospace sector has thrived on collaboration, and to date, no compulsory licences have been issued in this space. If anything, the law serves as a soft incentive to continue that cooperative spirit. As noted by the Australian Productivity Commission, most patent holders prefer to license their technology than let it go unused[8]. Licensing not only brings in revenue but also expands the impact of the technology. Blocking access in key moments, on the other hand, could invite regulatory action.

Another strategic angle is the reverse: Kiwi companies might need access to someone else’s IP during an emergency. For example, a local UAV manufacturer may require a foreign patented component to fulfil a defence contract. In these cases, knowing the government can invoke Crown use or facilitate a compulsory licence is reassuring. Companies should keep informed about relevant policy tools, such as the government’s emergency procurement framework[9], which may provide pathways for rapid technology access in a crisis.

Proactive companies may benefit from maintaining open communication with these agencies and understanding how their IP could be used in emergencies. If your tech is needed urgently, or you urgently need someone else’s, it is helpful to have a roadmap in place. This might include internal strategies or even pre-arranged licences, so that response times are swift and everyone knows where they stand.

In summary, compulsory licensing is about being ready. It is a legal tool for exceptional times, ensuring access to critical inventions while still respecting inventors’ rights through fair compensation. In peacetime, IP is a competitive advantage. But in a crisis, adaptability matters just as much. As global events have shown, flexibility in IP can help save lives and protect nations. For New Zealand’s aerospace sector, understanding and preparing for these legal mechanisms is part of being future ready.

Authors

Jonathan Lucas is a partner of James & Wells based in Auckland. He has been a patent attorney for nearly 20 years. With his academic background in physics, he advises clients on IP protection in several different fields within the aerospace sector, including physics, mechanical engineering, electrical engineering and software.

Hemi Jones is a trainee patent attorney based in James & Wells’ Hamilton office. Hemi has a degree in mechanical engineering and spent several years working as an engineer in the aviation industry. He advises clients on patents in a variety of engineering fields.

Footnotes

[1] https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm

[2] New Zealand Patents Act 2013, s 169(1)(a).

[3] New Zealand Patents Act 2013, s 176.

[4] Australian Patents Act 1990, s 133.

[5] Australian Patents Act 1990, s 163A.

[6] https://medicineslawandpolicy.org/2024/06/the-new-ip-strategy-of-war-torn-ukraine-should-prioritise-public-health-and-national-security

[7] https://themedialine.org/top-stories/russia-legalizes-espionage-to-bolster-military-capabilities

[8] Australian Government Productivity Commission Inquiry Report No. 61, p 115.

[9] https://www.procurement.govt.nz/guides/emergency-procurement/