Analysis of Compulsory Licensing In India

Chandana.L

Introduction

Concept of Compulsory licensing was first introduced by the UK Statute of Monopolies in 1623. A compulsory license is granted by a government to a third party to use patents or other types of intellectual property with or without the consent of the patent holder. The patent right is granted to the proprietor of an inventor as a bargain for disclosing the invention.

Compulsory licensing under the Paris Convention and the TRIPS agreement

Article 5 of the Paris Convention for the Protection of Intellectual property states that:

● It is the duty of each member country of the Union to grant Compulsory licence and prevent the abuses which may arise from the exclusive rights conferred by the patent to the patentee.

● Forfeiture or revocation of a patent will not be instituted against the patent before the expiration of three years from the grant of first compulsory licensing.

● A compulsory license may not be applied on ground failure to work or insufficient to work before the expiration of four years from the date of application of patent or three years from the grant of patent whichever period expires earlier.

Trade-Related Aspects of Intellectual Property Agreement

The main aim of the TRIPS agreement is to promote global competitiveness in trade and establish a global regime.

● Article 27 of the TRIPS Agreement states that a patent is available for any invention it can be either the product invention or process or both in all fields of technology without being discriminated against the place of invention, the field of technology and whether products are imported or locally produced. The only test it has to fulfil is to see the patent is new, non-obviousness and has an inventive step.

● Article 8 of TRIPS states that members of countries while formulating laws must see that they take necessary measures in protecting public health, nutrition.

● Article 31 of TRIPS states that while the subject matter of the patent is used for any other use than for the purpose for which the patent right is granted a few things to be observed before using such patent.

Doha Declaration on TRIPS and Public Health

The Doha declaration conference 2001 of the World Health Organisation (WHO) adopted a declaration that affirms the importance of public rights. As India is one of the members of the TRIPS agreement it is an obligation on the member country to grant a compulsory license.

Below are the important objectives of establishing the Doha Declaration by the WTO members in 2001 is to:

1. To resolve the issues of public health.

2. To check patent rights are not granted in a way which is disadvantageous to minority groups of society.

3. To see that medicines are available at affordable rates.

COMPULSORY LICENSING IN INDIA

According to Section 84 of the Indian Patent Act, 1970 in order to grant compulsory license three years must have elapsed from the date of grant of a patent provided, the following requirements must be satisfied :

1. Reasonable requirements of the public have not been fulfilled from the patented invention;

2. The invention is not available to the public at affordable rates;

3. The invention has failed to work in the territory of India.

Reasonable requirements of the public are not satisfied according to Section 84(1) if

1. Patentee refuses to grant a license on reasonable terms;

2. An existing trade or industry is prejudiced;

3. Conditions imposed by the patentee;

4. The patent has been non-working in the territory of India

Procedure to obtain Compulsory licensing in India

The main aim to grant compulsory licensing is to provide that the patented articles shall be made available to the public at reasonable prices.

According to Section 84 of Indian Patents Act, 1970 states that any person who wishes to obtain a compulsory license shall state in the application form the applicant interest to the controller to obtain a compulsory license and on the expiry of three years from the date of grant.

At the time of considering the application controller shall take into account the following things

1. The nature of the invention.

2. Time elapsed since the date of grant of the invention.

3. Ability and capacity of the applicant to work on the invention

4. An applicant has obtained the license to work on a patent on reasonable terms and conditions.

If the controller is satisfied that a prima case has been made out he shall direct the applicant to serve copies on the patentee.

Any person other than the patentee opposes the application he may serve notices of opposition on the controller and he may also send a copy of opposition and evidence to the applicant.

The opposition shall be made within the prescribed time as specified by the controller.

The reasonable opportunity of being heard shall be given by the controller to the applicant.

Where an applicant of compulsory licensee shows that he can work on the patent invention which has been granted to him without infringing the other patents held by the patentee, the controller may grant licenses.

When a compulsory license is granted by the controller to the licensee the following points to be taken into account:

1. Royalty and remuneration to be reasonable;

2. The patent invention is available at reasonable prices to the public;

3. The patent invention is worked on the fullest extent;

4. License which is granted to be non-exclusive;

5. Right of the licensee is non-assignable

6. Grant of a license is for the remaining term of a patent.

Revocation of Patent by Controller

According to Section 85 of Indian Patent Act, 1970 states a patent may be revoked by the controller for non-working in the territory of India.

Compulsory license on notification of the central government

According to Section 92 of the Indian Patent Act, 1970 compulsory license may be granted by the central government when there arises:

● Extreme emergency;

● National emergency;

● Public non-commercial use.

The procedure which is required to be fulfilled in order to obtain a patent for a compulsory licensing need not be fulfilled by the central government when there arises an extreme emergency, national emergency, public non-commercial use which includes public health crises such as AIDS, HIV, Tuberculosis, Malaria and other epidemics.

Termination of compulsory license

According to Section 94 of Indian Patent Act, 1970 states compulsory license may be terminated when an application is made by the patentee or any other person who derived the title in the patent and such application should be made to the controller on the ground that such circumstances gave rise and right to use patent no longer exists.

Judicial Pronouncement on Compulsory Licensing

A detailed study on Bayer corporation versus Union of India

Bayer Corporation v. Union Of India is the first case on compulsory licensing.

Facts of the case

In this case, the petitioner in this case (US Corporation) got a patent for a drug manufactured in India. Sorafenib tosylate the brand commonly called Nexavar, which is used for treating the patients who are suffering from kidney cancer (Renal Cell Carcinoma) and liver cancer (Hepatocellular Carcinoma).

6th December 2010

Natco, a drug manufacturer in India approached the petitioner for grant of voluntary license for the purpose of manufacturing and selling the patented drug at the price lesser than of the petitioner. The cost of the drug manufactured by the petitioner was INR 2,80,428 per month for therapy. Natco wanted to manufacture the said drug for a price of less than INR 10,000 per month. Natco also further added that in the application the reasonable requirements of the public were not satisfied and it also resulted in non-working in the territory of India due to the high cost of the drug.

10th December 2010

The petitioner dismissed the application for manufacturing and selling the patented drug.

29th July 2011

After the petitioner rejected the application natco filed an application before the controller of a patent for the grant of a compulsory license under Section 84 of Patent Act 1970.

9th March 2012

The controller of Patent granted the license and while granted the license to manufacture and sell the drug and also directed Natco to pay 6% of the royalty from its net sales to the petitioner and the drug to be sold at INR 8,800 for 120 tablets per month of therapy.

The petitioner was aggrieved by the order and further filed an appeal to the Intellectual Property Appellate board.

4th March 2013

The Tribunal upheld the decision of the Controller and rejected the petitioner's appeal. However, the tribunal increased the royalty to be paid to the petitioner from 6% to 7% of the sales of patented drugs.

15th July 2014

The petitioner filed a writ in Bombay High Court challenging the decision of Controller and the Intellectual Property Appellate Board. The High court held that it found no reasons to interfere into the controller's decision and IPAB held the same view as that of the High Court and upheld its decision and granted the Compulsory license to Bayer Corporation to manufacture and sell the drug.

Judgement

This case gives a clear view that the compulsory license ensures the ability to give access to medicine, by the way, providing alternative suppliers in the market and it also ensures a compromise between the inventor and the public and also made an obligation to see that public interest is to be fundamental in deciding a suit between the parties while granting a compulsory license for medicines.

Lee Pharma v. AstraZeneca

In this case, an application was filed on 29th June 2015 by Lee Pharma Hyderabad based (India Pharma Company) for the Patent covering AstraZeneca's diabetes management drug Saxagliptin. To make a prima facie case Lee Pharma strived to show that their negotiations for a voluntary license were not rewarding as they did not receive any response from the patent owner within a reasonable time. The grounds alleged by Lee Pharma were

● Reasonable requirements of the public have not been satisfied;

● The invention not available at affordable prices;

● Patented Invention is not worked in the territory of India.

However, all the three above grounds were rejected by the controller of the patent.

The application was rejected by the controller of a patent on the following grounds:

● Lee Pharma failed to show what are the reasonable requirements of the public was with respect to Saxagliptin and comparative requirement of drug Saxagliptin vis-a-vis other drugs which are also DPP-4 inhibitors;

● And further held that all DPP-4 inhibitors were in the same bracket and allegation that only Saxagliptin alone was being sold at higher prices was unjustified;

● Failed to show the exact number of patients prescribed the patented drugs;

● And how many of the patients were unable to afford the patented drug due to its non-availability.

Pros of compulsory licensing

● Government at any time makes an application for the grant of compulsory license, not necessary to wait for three years from the grant of a patent, which is one of the conditions before acquiring the patent.

● By issuing compulsory licenses there is an alternative supplier in the market to manufacture and sell the patented invention.

● Accessibility to Essential Medicines/drugs are available at affordable prices.

● Ensuring and safeguarding public health becomes a prime motive.

● Provides monopoly rights to the patentee to manufacture, sell and export the patented invention

● Mandatory to grant compulsory license from the elapse of three years from the date of grant of patent

Cons of compulsory licensing

● Sometimes there arises dissatisfaction the remuneration which is paid to the patentee is not fair for his hard work.

● In developed countries, it is neither an effective nor necessary cost controlling mechanism.

● It discourages the development of research amongst generic manufacturers.

Conclusion

A compulsory license is one greatest regime in India that helps in manufacturing and selling useful drugs at affordable rates. Public interest is made a prime motive to grant a compulsory license.