India: Compulsory Licensing In India

Last Updated: 18 January 2019
Article by Nayanikaa Shukla

Meaning of Patent

WIPO defines patent as an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem.1 A patentee shall have exclusive rights over his invention for a period of 20 years, and he can exclude others from making any use of his patented product. But under certain circumstances, a compulsory license to make use of a patented product may be given to a third party. This concept of compulsory licensing has been given in the chapter XVI of the Indian Patents Act, 1970.

What are Compulsory Licenses under the Patents Act?

Compulsory licenses are authorizations given to a third-party by the Controller General to make, use or sell a particular product or use a particular process which has been patented, without the need of the permission of the patent owner. This concept is recognised at both national as well as international levels, with express mention in both (Indian) Patent Act, 1970 and TRIPS Agreement. There are certain pre-requisite conditions, given under sections 84-92, which need to be fulfilled if a compulsory license is to be granted in favour of someone.

As per Section 84, any person, regardless of whether he is the holder of the license of that Patent, can make a request to the Controller for grant of compulsory license on expiry of three years, when any of the following conditions is fulfilled –

  1. the reasonable requirements of the public with respect to the patented invention have not been satisfied
  2. the patented invention is not available to the public at a reasonably affordable price
  3. the patented invention is not worked in the territory of India.

Further, compulsory licenses can also be issued suo motu by the Controller under section 92, pursuant to a notification issued by the Central Government if there is either a "national emergency" or "extreme urgency" or in cases of "public non-commercial use".

The Controller takes into account some more factors like the nature of the invention, the capability of the applicant to use the product for public benefit and the reasonability, but the ultimate discretion lies with him to grant the compulsory license. Even after a compulsory license is granted to a third party, the patent owner still has rights over the patent, including a right to be paid for copies of the products made under the compulsory licence.2

Cases pertaining to grant of compulsory license

India's first ever compulsory license was granted by the Patent Office on March 9, 2012, to Natco Pharma for the generic production of Bayer Corporation's Nexavar, a life saving medicine used for treating Liver and Kidney Cancer. Bayers sold this drug at exorbitant rates, with one month's worth of dosage costing around Rs 2.8 Lakh. Natco Pharma offered to sell it around for Rs 9000, making it affordable for people belonging to every stratum. All the 3 conditions of section 84 were fulfilled and the decision was taken for the benefit of general public.

In some more cases related to grant of compulsory license in pharmaceutical industry, the controller rejected the grant on various grounds like failing to prove prima facie case, not applying for a license of patent prior to applying for compulsory license and failure to prove public use of the product sought to be use by the compulsory license.3 It is said that in the law of patents, it is not sufficient merely to have registration of a patent. The Court must look at the whole case, the strength of the case of the patentee and the strength of the defence.4

In certain cases recently, the Indian courts have ruled that the provision against anti-competitive practices in the competition act and the provision of compulsory licensing in the patent act are not in exclusion of each other; in fact they have to be read conjunctly. The question 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 its 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.5

The judicial approach with respect to grant of compulsory license is that the provision is for public welfare and it cannot be misused to diminish the rights of the patent holders. There must a balance between thee rights and making use of the product for welfare purposes.

Conclusion

The provision of compulsory licensing must be used judiciously as it is an exception and flexibility to the general rule of patent. The provision falls mid-way; neither full patent protection is granted, nor is it denied altogether it directly affects innovation funding and unfettered use of this provision may result in global pharmaceutical companies being hesitant to introduce new medicines in other countries. Hence the companies have to fix the cost of their patented module according to the economic status of the country if they want to protect their product from compulsory licensing.

Compulsory licensing has now become the hope for financially challenged patients in underdeveloped countries. India needs this provision owing to the economic condition of the majority population. But the challenge is that on one hand, it has to comply with the international standards of patent protection and on the other, it has to safeguard public health.

Footnotes

1 https://www.wipo.int/patents/en/

2 https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm

3 http://www.khuranaandkhurana.com/2017/08/03/compulsory-licensing/

4 Franz Xaver Huemer vs.  New Yash Engineers (08.03.1996 – DELHC) : MANU/DE/0015/1997

5 Koninklijke Philips Electronics N.V. vs. Rajesh Bansal and Ors. (12.07.2018 – DELHC): MANU/DE/2436/2018.

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