Mar 10, 20204 min read

COMPULSORY LICENSING OF PATENTS

The Patent Act, 1970 has been amended thrice in 1999, 2002, 2005 in relation to the inclusion of the concept of ‘compulsory license’. Indian Patent Act, 1970 as well as the international legal agreement between all member nations of WTO – the TRIPS (Trade-Related Aspect of Intellectual Property Rights) cover the provision of compulsory licensing. Chapter XVI of the Indian Patent Act, 1970 deals with the provision of compulsory licensing and is covered from section 84-92.

Compulsory licensing is basically the authorization given to the third party by the Government to make, use or sell a particular product which has been patented, without the permission or consent of the patent owner.[1]

According to section 84 of the Indian Patent Act, 1970 which grants for compulsory licenses, any person interested at any time after the expiration of three years from the date of grant of a patent may make an application to the Controller for the grant of a compulsory license on patent on the ground that the patented inventions:

a. It does not satisfy the requirement of the public,

b. It is not available to the public at a reasonable affordable price and

c. Is not worked in the territory of India.

However, in accordance with section 92A of the Act[2], compulsory licensing can also be done for exports under exceptional circumstances, in case of national emergency and country which has no means and manufacturing power in the pharmaceutical sector to address public health.

The turning point in the Indian Judiciary was when the first time the compulsory licensing was granted by the patent office in 2012 in the case of Natco v. Bayer.[3] An Indian company called Natco Pharma for the generic production of Bayer Corporation’s Nexavar, the medicine used for treating Liver and Kidney cancer. The dosage cost was Rs.2.8 lakh but Natco Pharma offered to sell it for Rs.90,000 a lifesaving drug accessible to society at large and not just for wealthy persons. However, this decision was criticized by the Pharmaceutical Companies as the license should not have been granted. But the general principles laid down under section 83 of the Act[4], which are applicable for the working of the patented invention say that “patents granted do not anyway prohibit central government in taking the measures to protect the public health”.[5]

Moreover, the Health Ministry of India recommended three anti-cancer drug trastuzumab, ixabepilone, and dasatinib for compulsory licenses. Under the Patent Act, a compulsory license can be granted for a drug if the medicine is deemed unaffordable.

Compulsory licensing and Competition law go hand in hand. The concept of compulsory licensing has been criticized by many corporations since there has been exploitation of the invention of the patentee which leads to a rise in the competition as well.

Indian courts not long ago have ruled that the provision against anti-competitive practices in the competition act and the provision of compulsory licensing in the patent act are in the inclusion of each other. The issue of whether a patentee had adopted anti-competitive practices could also be considered by the Controller. However, if CCI has finally found a patentee’s conduct to be anti-competitive and finding has attained finality, the Controller would also proceed on the said basis and on the principle akin to issue estoppel the patentee would be estopped from contending to the contrary.[6]

The judicial approach with reference to the grant of compulsory licenses is that there must a balance between the rights and making use of the product for welfare purposes, the provision is for public welfare and it cannot be misused to infringe the rights of the patent holders.

The patient versus patent issue is one of the most important and tiring problems now in the modern healthcare system. The justification that the big pharmaceutical companies do not want compulsory licenses to be passed is that they take a lot of money and effort to create the drugs and medicines, and even that is not also certain. They have to compensate for the costs of innovation.

Compulsory licensing is vital for underdeveloped and developing countries. As the resources which are not available in some countries can be a necessity for that country. Medicine and drugs are a necessity for society and if a patented drug is available in a country but is very expensive that a normal person can’t afford that drug then the government has to make such drugs available for the people who cannot afford it. Here, the compulsory license comes into the picture. Compulsory licenses will make a similar product available to the people who does not have the means to afford that drug. A compulsory license stops the misuse of Intellectual property rights. It gives recognition to the owner of the patent keeping in mind the limitation for the owner. The concept of compulsory license lies in adjusting the patentee’s rights and making the product accessible at a reasonable cost to outsiders.

End Notes:

[1] Indian Patent Act, 1970, Section 84. [2] Compulsory license for the export of patented pharmaceutical products in certain exceptional circumstances. [3] Natco Pharma Limited v. Bayer Corporation, Compulsory License Application No 1/2011. [4] General principles applicable to working of patented inventions. [5] India Patent Act, 1970, Sec 83(e). [6] Koninklijke Philips Electronics N.V. v. Rajesh Bansal & Ors. (12.07.2018 – DELHC): MANU/DE/2436/2018.