Compulsory Licensing

A patent grants an exclusive statutory right to the inventor over his invention, whether a product or a process, which provides a new way of doing something or offers a new technical solution to a problem, enabling the patent holder to prevent any other person from using, selling or manufacturing the patented product or process without his consent.[1] In India, a patent is granted for a period of 20 years.

What is compulsory licensing:

Many a times, it so happens that the patent owner does not make proper use of his invention or abuses his exclusive right to the detriment of others. In such cases, in the interest of the public, the government grants a compulsory license to a third-party to use, sell or manufacture the patented product or process, without the permission of the owner. In the International regime, the provisions regarding compulsory licensing are provided under the TRIPS Agreement.

Indian Scenario:

The provisions for compulsory licensing are provided under sections 84-92 of chapter XVI of the Patents Act, 1970. As per section 84(1), any interested person can make an application to the Controller for the grant of compulsory license on patents, after the expiration of three years from the date on which the patent was granted. However, there are certain grounds which need to be satisfied for demanding compulsory license namely:

• That the patented invention has not satisfied reasonable requirements of the public
• That, it is not available to the public at an affordable price
• That the invention is not worked in the Indian Territory

While considering the grant of patent, the Controller also needs to keep in mind other factors such as:

• The nature of the invention
• Applicant’s ability to work with the patented invention for public benefit
• Measures already taken by the patentee or the licensee to make full use of the invention
• Applicant’s capacity to bear the risk of providing capital as well as working the invention
• Applicant’s efforts to obtain license from the patentee on reasonable terms and conditions and such efforts have failed within a reasonable period as deemed fit by the Controller.[2]

Further section 92 states that the Central Government, may by way of a notification in the Official Gazette, declare that a compulsory license can be granted in circumstances of:

• national emergency
• extreme urgency
• in cases of public non-commercial use

Section 92A provides for compulsory licensing for manufacture and export of patented pharmaceutical products in certain exceptional cases. To address public health, such licenses can be granted to any country which has insufficient or no manufacturing capacity in the pharmaceutical sector for the product.

Case laws on compulsory licensing in India:

India’s very first case relating to compulsory license was Bayer v. Natco. In this case, Natco Pharma, a Hyderabad based pharmaceutical company was granted a compulsory license for the production of a generic version of Bayer’s Nexavar-Sorafenib, an anti-cancer agent used for treating liver and kidney cancer. It was established that only a mere 2% of the population of cancer patients could easily access to the drug and that it was being sold by Bayer at an exorbitant price of Rs. 2.8 lacs for a month’s treatment. The Indian Patent Office granted compulsory license to Natco on the grounds that Nexavar was being imported within India and that Natco would sell the drug at an affordable price of Rs. 8880 a month. The said order of the Controller was also upheld by the IPAB which was further challenged by Bayer before the Bombay High Court wherein it was held by the Hon’ble court that Bayer had failed to meet the requirements provided under section 84 of the Act and further observed that the whole purpose of granting compulsory license was to make the patented articles easily available to the Public in sufficient quantity and at affordable prices.

The Natco case encouraged other pharmaceutical companies to opt for compulsory license. However, in the case of BDR Pharmaceuticals Pvt. Ltd. v. Bristol Myers Squibb, the Controller rejected BDR Pharmaceutical’s application for compulsory licensing over Bristol Myers Squibb’s cancer treating drug SPRYCEL which consisted of an active ingredient known as DASATINIB, used by patients with chronic Myeloid Leukemia. The Controller rejected BDR’s application on the grounds that it failed to make a prima facie case for making of an order under section 87 of the Act which lays down the procedures for dealing with applications made under section 84 and 85. The Controller further observed that BDR had failed to make any credible attempts for procuring a voluntary license from the patentee (BMS) and had also not acquired the ability to work with the patented invention to the public benefit under section 84 of the Act.[3]

The most recent case regarding the grant of compulsory licensing is Lee Pharma v. AstraZeneca AB. In this case, Lee Pharma, a Hyderabad based pharmaceutical company, had filed an application for compulsory license over Astra Zeneca’s diabetes management drug Saxagliptin on 29.06.15 and in order to establish a prima facie case also declared that the patentee had not responded to the request for a license within a reasonable period. The applicant also alleged that the patent holder had failed to fulfill the conditions provided under section 84(1)(a), (b) and (c). However, the Controller rejected all the three grounds and refused to grant compulsory license on the basis that it failed to demonstrate the reasonable requirement of the public and the comparative requirement of the drug with relation to other drugs. In addition to that, the Controller held that all the other DPP-4 inhibitors (same as Saxagliptin) were available for the same price in the market. Hence the allegation that Saxagliptin was being sold at an exorbitant rate was unjustified. Lee Pharma also failed to show the exact number of patients who were unable to obtain the drug due to its non-availability which further made it difficult to hold whether its manufacturing in India was necessary or not. [4]

Conclusion:

So far India has witnessed only one successful case of grant of compulsory license. Compulsory licensing comes with its own pros and cons. While on one hand it violates the rights of the patent holders by inhibiting their profit margin which could be used to recover the cost involved in research and development and to finance further research, the violation becomes necessary at times so as to prevent the patent holder from misusing the monopoly right and protect the right to health by giving the public an easy access to essential drugs. Thus, there is a need for striking a balance between the interest of the patent holder and accessibility of the invention to the people in need at affordable prices.

[1] Wipo.int. Patents. [online] Available at: <https://www.wipo.int/patents/en/> [Accessed 5 February 2021].

[2] See section 84(6) of the Patents Act 1970.

[3] Rohatgi, H., n.d. Indian Patent Office Rejects Compulsory Licensing Application: BDR Pharmaceuticals Pvt. Ltd. Vs Bristol Myers Squibb. [online] IIPRD Blog – Intellectual Property Discussions. Available at: <https://iiprd.wordpress.com/2013/11/13/indian-patent-office-rejects-compulsory-licensing-application-bdr-pharmaceuticals-pvt-ltd-vs-bristol-myers-squibb/> [Accessed 5 February 2021].

[4] Kapoor, A., 2016. The Conundrum Of Compulsory Licensing – Intellectual Property – India. [online] Mondaq.com. Available at: <https://www.mondaq.com/india/patent/476438/the-conundrum-of-compulsory-licensing> [Accessed 5 February 2021].

Authored by
 Sanjana Ganguly, 
Third year student at Symbiosis Law School, Pune