A compulsory license provides that the owner of a patent or copyright licenses the use of their rights against payment either set by law or determined through some form of adjudication or arbitration. In essence, under a compulsory license, an individual or company seeking to use another's intellectual property can do so without seeking the rights holder's consent, and pays the rights holder a set fee for the license. This is an exception to the general rule under intellectual property laws that the intellectual property owner enjoys exclusive rights that it may license – or decline to license – to others.

Under UK patent law, a compulsory license is different from a statutory license. Under statutory license, the rate is fixed by law, whereas in case of compulsory license, the rate is left to be negotiated or decided in court.