COMPULSORY LICENSING OF PATENTS: A CRITICAL ANALYSIS

Source : Intellectual Property Office

This Article has been authored by Udisha Mishra, a student of second-year at West Bengal National University of Juridical Sciences, Kolkata.

Introduction

Patent, as defined by WIPO is “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.” This provides the patentee, the holder of the rights, an exclusive right over the exploitation of the invention for the period of 20 years, during which he can prohibit any other person from using his patented product in any way. But there also exists a provision where under certain circumstances, a ‘compulsory license’ to use this patented product may be given to a third party by the patent office. This concept of the ‘compulsory licensing’ is embodied in Chapter XVI of the Indian Patents Act, 1970 (“the Act”).

Granting a Compulsory License for Patent

The Indian Patents Acts 1970 and the TRIPS Agreement have recognised the concept of ‘compulsory license’ expressly. It can be understood as an authorisation provided by the Controller General of the Patent Office to a third party to “make, use and sell a particular product or use a particular process which has been patented.” The party applying for the license need not take permission from the patent holder. For applying for the license, the applicant has to fill the Form 17 of the Patent Office, along with documents related to further intricate details such as nature of the applicant’s interest and basis of the application.

The ultimate discretion regarding the issuance of the license lies with the Controller. The Controller before authorising takes into accounts certain relevant factors related to the product such as the nature of the invention, the reasonability and the ability of the person demanding the licence to make use of the product so as to benefit the public at large. In case the third party gets the license, it owes a duty towards the patent holder to pay s/he for the copies of the product being generated under the aegis of the license.

For successfully acquiring the right, the third party has to meet the pre-requisites provided under sections 84-92 of the Act. Section 84 of the Act, after the expiration of three years of the product getting patented, any person irrespective of the fact whether s/he is the holder of the license of the patent or not, can apply for the compulsory license of the patent by requesting the Controller Officer. The request is subjected to the following conditions (Extracted verbatim from the Indian Patents Act, 1970)-

1. That the reasonable requirements of the public with respect to the patented invention have not been satisfied

2. That the patented invention is not available to the public at a reasonably affordable price

3. That the patented invention is not worked in the territory of India.

Along with the mentioned scenarios, Section 92 of the Act exhibits a provision wherein the Controller Officer can suo moto issue compulsory license to a third party in circumstances when the Central Government, notifies that the same is required on the grounds of either “ national emergency” or “extreme urgency” or in cases of “public non-commercial use”. Through this, the Government is empowered to release a notification stating the issuance of such right, and any third person can apply for the compulsory license. The license would be granted by the Controller Officer subject to terms and conditions he deems fit.

Cases relating to Compulsory Licensing of Patents

The first ‘compulsory license’ granted in India was to Natco Pharma on March 9, 2012, by the Patent Office in Hyderabad. It authorised the Corporation for the generic production of Nexavar, a drug produced by the Bayer’s Multinational Corporation. Nexavar is no less than an elixir for patients suffering from Kidney or Liver cancer. The vast population was unable to access it due to its exorbitant price, as a one-month dosage of the drug cost roughly 2.8 lakh. Natco Pharma through its demand for compulsory license offered to sell the drug for around Rs. 9000, which is way cheaper, making the life-saving drug accessible to patients belonging to each and every stratum of society. It was also agreed upon by the parties that “6% of the net sales of the product” would be paid to the Bayer’s Corporation.

In Franz Xaver Huemer vs. New Yash Engineers dealing with the issue, the license was rejected by the Controller, on the grounds that the applicant did not follow the procedure as per Section 87 of the Act. The applicant before applying for the compulsory license did not apply for the license of patent, which is a necessary requirement, and also the pre-requisite requirement of ‘public benefit’ could not be proved from the application. It was held that while deciding such cases, both sides of the case, that is the strength of the defense and the forte of the case of the patentee have to be considered.

In Koninklijke Philips Electronics vs. Rajesh Bansal, the court upheld that the provision in the Indian Patent Act, regulating the ‘compulsory licensing’ and the provisions of the Competition Act, 2002, controlling the anti-competitive practices in commercial arena are not exclusive of each other and are required to be read conjunctly. While issuing the license, the Controller has to address the contention regarding the anti-competitive practices adopted by the patentee, if any. If CCI’s decision regarding the involvement in anti-competitive practice is finalised, the patentee cannot argue the contrary, and the Controller needs to take cognisance.

Issue of ‘Compulsory Licensing’ in the times of Covid-19

As the adverse impact on the Covid-19 pandemic intensifies, the countries and international organization’s trepidation on access to various health supplies and medicines also intensifies. Countries fear of devastation as they have limited resources to combat such a communicable disease spreading at an immense rate. Proposals regarding granting of patent rights are being addressed at national as well as international forums. For example, WHO tried to implement an idea proposed by Costa Rica, which endorsed the creation of a voluntary pool of patent rights, which would eventually expedite the development of vaccines, diagnostics and other health-related requirements during the pandemic. Chile, Canada and Ecuador amended their statues and laid the legal framework regulating the compulsory license provisions to combat the Covid-19 crisis. Israel became the first country to issue a compulsory license to import a “generic version of lopinavir/ritonavir” to address the pandemic in the state.

India, being a developing country, cannot afford to provide its 135.26 crore population with expensive pharmaceuticals. The patients are suffering due to the shortage in the availability as well as the soared price of the available drugs such as Gilead’s Remdesivir and Roche’s Tocilizumab, which are no less than panacea in current times. The scarcity of the remedy and an increasing number of cases is imploring the country heads to find and secure ways for the creation of life-saving drugs at a cheaper rate so that patients belonging to each stratum have access to it. One such way can surely be granting ‘Compulsory Licensing’ to national companies so that same/similar drugs can be generated on larger platforms and at a cheaper rate which will in turn increase their accessibility, for which India is in dire need of a structured mechanism regulating the same.

Conclusion

It is evident from the stance taken by the Indian courts that granting the compulsory license is not a one-sided process while doing so the controller needs to establish a balance between the patentee’s right and right of the third parties which claims to use the product for the benefit of the population. The fact that this provision exists for the pursuance of the goal of public welfare only, and should be employed to diminish the rights of the patent holder has been cemented through various judgements that.

In the context of pharmaceuticals, in India, where more than half of the population cannot access to drugs needed because of their high price, this provision acts as a boon. Compulsory licensing would allow the other companies to generate such drugs at a cheaper rate so that they can be made available to the needy. Owing to which, the multinational/national corporations which originally produce the drugs are against such licensing. It affects innovation funding and rampant use of this might result in such companies becoming hesitant in introducing new drugs to the country. To evade and protect their product from “compulsory licensing” the companies ought to modulate the cost of their product according to the economic status of the country, they are releasing their product in.

Nonetheless, at present in time of Covid-19, ‘Compulsory Licensing’ can be viewed as the only way out for the underdeveloped or developing countries to make various otherwise expensive drugs available to its patients. India belonging to this group has to act judiciously on the issue so that it can safeguard the public health and enhance its standards without tampering the norms of the international standards of patent production.