The basic objective of the Act in granting patents is to encourage inventions and to secure that the inventions are worked in India on a commercial scale (G/averbal S.A. v. Dave Rose & Ors. (2010)) and to the fullest extent without undue delay.
The rationale is that the patented invention should be worked on a commercial scale to ensure that the benefit reaches the largest number of people. (Bayer Corporation & Anr. v. Union of India & Ors. (2013). Compulsory licence is one of its limitation.
Table of Content
Judicial Decision
Statutory Provisions
The Controller may grant compulsory licences upon an application being made under section 84 of THE PATENTS ACT, 1970 to the Controller by an interested person, on grounds specified therein. The applicant in this case must make out a prima facie case, as required under section 87, whereupon notice of the same shall be issued to the patentee and shall also be published in the Official Journal.
Thereafter, if the Controller is satisfied, the compulsory licence may be granted, as per the provisions of section 88. The licence may be subject to terms and conditions under section 90, of THE PATENTS ACT, 1970
A compulsory licence to work a patented invention may be granted under section 84 by the Controller to an interested person on one of the following grounds:
the reasonable requirements of the public with respect to the patented invention have not been satisfied; or
the patented invention is not available to the public at a reasonable price; or
the patented invention has not worked in the territory of India.
Section 84 further provides:-
Section 84 consist of several key components designed to ensure that patented inventions serve the public interest, particularly regarding access, affordability, and local working of the invention. Here's an overview of these provisions:
Eligibility for Application: After three years from the date a patent is granted, any interested person can apply for a compulsory license based on specific grounds (Section 84(1)).
Application Requirements: The application must include a statement of the applicant's interest, particulars as prescribed, and facts supporting the application (Section 84(3)).
Decision Criteria: The Controller of Patents may grant a compulsory license if satisfied that the public's reasonable requirements have not been met, the invention is not reasonably affordable, or the invention is not worked in India (Section 84(4)).
Powers of the Controller: If directing the patentee to grant a license, the Controller can exercise additional powers as set out in Section 88 (Section 84(5)).
Considerations for the Application: The Controller will consider various factors, including the nature of the invention, efforts by the patentee or licensee to utilize the invention, the applicant's ability and capacity to work the invention, and efforts made to obtain a license from the patentee on reasonable terms (Section 84(6)).
Non-satisfaction of Public Requirements: The law deems the public's reasonable requirements not satisfied in several specific scenarios, including if the patentee's refusal to grant licenses on reasonable terms prejudices existing or new industries, if the demand for the patented article is not met adequately, if the patentee imposes restrictive conditions on licenses, if the invention is not worked on a commercial scale in India, or if the working of the invention in India is hindered by imports (Section 84(7)).
These provisions ensure that while patent rights are protected, they do not hinder public access to important technological advancements or healthcare solutions.
Compulsory licensing serves as a mechanism to balance the rights of patent holders with the needs of the public, ensuring that patents do not lead to monopolistic practices that can restrict access to essential medicines, technologies, or other patented inventions critical for public health and innovation within the country.
It ensures that patented inventions are made available at reasonable prices and are worked within the territory of India to the benefit of its citizens. This mechanism is particularly vital in sectors like pharmaceuticals, where access to affordable medicines is a key concern for public health.
The Controller is not bound to take into account any matter subsequent to the making of the application for a compulsory licence. However, the controller can consider an application for a compulsory licence only after the expiry of three years from the date of grant of the patent.
It may be noted that for the purpose of granting compulsory licence, or endorsement with the words 'licenses of right', or revocation of patent for non-working, the term 'patentee' includes an exclusive licensee as well.(Section 82(b).
Case law
In Bayer Corporation v. Union of India, the Bombay High Court held that 'an application for compulsory licence can be made by any person to the Controller on satisfaction of the following two per-requirements/conditions:
a) An application for compulsory licence can be made only after expiration of three years from the date of the grant of patent to the patent holder; and
b) The applicant should have made an effort to obtain a voluntary licence of the patented invention from the patent holder on reasonable terms and conditions.
It is only on the satisfaction of the above two requirements that the Controller can consider the application for compulsory licence'.
Under section 84, failure to satisfy the reasonable requirements of the public may arise from the following causes:
Inadequate manufacture in India or failure to grant licences on reasonable terms. Non-working of the patent in India on a commercial scale.
Conditions imposed by the patentee upon the grant of licence.
Demand for the patented article being met by importation from abroad.
Commercial working of the patented invention in India being hindered or prevented by import of the patented articles from abroad
Thus, if there was no actual working of the patent in India at the time of the application, and the patentee arranged for subsequent working probably for the purpose of defeating the application, it was not acceptable as a defence against granting a licence.
Where, however, the patentee has taken with promptitude adequate or reasonable steps to start the working of the invention in India on a commercial scale, the Controller may take this into consideration. (Section 94(2).
However, securing the fulfilment of both the clauses may sometimes lead to conflict of interests to be reconciled. If the Controller is satisfied that either of the grounds referred to in section 84(1) of THE PATENTS ACT, 1970 has been established, then he/she may order the patentee to grant a licence upon such terms as he/she may deem fit.
BDR Pharmaceuticals vs. Bristol-Myers Squibb (2013): BDR Pharmaceuticals applied for a compulsory license for Bristol-Myers Squibb’s patented cancer drug Dasatinib, used in the treatment of chronic myeloid leukemia.
Decision: The Patent Office rejected BDR's application on procedural grounds, stating that BDR had not made sufficient efforts to obtain a voluntary license from Bristol-Myers Squibb before applying for a compulsory license.
Any person interested in working the invention may make an application for the grant of a compulsory licence. However, the Controller also has to assess the technical skill and the financial resources of the applicant to arrive at a decision. The decision ascertains whether the applicant has the ability to work the invention to public advantage, or whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions(Section 84(6)).
Lee Pharma vs. AstraZeneca (2015) : Lee Pharma filed an application for a compulsory license for the diabetes drug Saxagliptin, patented by AstraZeneca.
DecisionThe application was rejected by the Indian Patent Office on the grounds that Lee Pharma failed to provide evidence that the drug was unaffordable and that they had made adequate efforts to obtain a license from AstraZeneca.
No licence is required for using the patented invention merely for the purpose of experiment, research or imparting instructions to pupils. A person who is already the holder of a licence may also make an application for a compulsory licence
Prime Facie Case
The applicant for a compulsory licence has to make out a prima facie case (Bayer Corporation v. Union of India 2014) as to why a compulsory licence should be granted to him/her, since he/she is the one alleging that reasonable requirements of the public with respect to the patented invention have not been satisfied.
Initial Burden on Applicant: The applicant for a compulsory licence must initially demonstrate a prima facie case that one or more of the grounds specified in Section 84(1) for granting a compulsory licence apply.
This involves showing that the reasonable requirements of the public with respect to the patented invention have not been satisfied, that the patented invention is not available to the public at a reasonably affordable price, or that the patented invention is not worked in the territory of India.
Controller's Evaluation and Procedure
Evaluation of Prima Facie Case: Under Section 87(1) read with Rule 97, the Controller of Patents assesses whether the applicant has made out a prima facie case for the grant of a compulsory licence. If the Controller determines that no prima facie case has been established, the application may be refused at this initial stage.
Notification to Patentee: If the Controller finds that a prima facie case has been made, the patentee (and any other interested person specified in the register) is notified and given an opportunity to oppose the compulsory licence application. This ensures that the patentee's interests and perspectives are considered in the decision-making process.
Hearing and Final Decision: The Controller conducts a hearing where both the applicant and the patentee (along with any other interested parties) can present their arguments. The final decision on whether to grant the compulsory licence is based on a full consideration of the evidence and arguments presented, focusing on whether one of the grounds specified in Section 84(1) is satisfactorily established.
Terms and conditions of a compulsory licence
Section 90 of the Indian Patents Act, 1970, outlines the terms and conditions under which compulsory licenses are granted, focusing on ensuring that such licenses serve the public interest while balancing the rights and interests of patent holders. Section 90 specifies the terms and conditions of a compulsory licence, wherein Controller shall endeavour to secure:
Royalty and Remuneration: The Controller aims to ensure that the royalty and other payments to the patentee are reasonable, taking into account the nature of the invention, the expenditure incurred by the patentee in developing and patenting the invention, and other relevant factors (Section 90(1)(i)).
Working of the Invention: The licensee must work the patented invention to its fullest extent and be able to make a reasonable profit from it (Section 90(1)(ii)).
Accessibility and Affordability: Patented articles must be made available to the public at reasonably affordable prices (Section 90(1)(iii)).
Non-exclusive License: The license granted is non-exclusive, meaning the patentee can license the invention to others as well (Section 90(1)(iv)).
Non-assignability: The rights granted to the licensee cannot be transferred to another party (Section 90(1)(v)).
Term of License: The license is granted for the remaining term of the patent unless a shorter term is deemed consistent with the public interest (Section 90(1)(vi)).
Predominant Supply to the Indian Market: The primary purpose of the license is to supply the Indian market, although the licensee may also export the patented product if necessary, subject to specific provisions (Section 90(1)(vii)).
Semiconductor Technology: For semiconductor technology, the licence is granted only for public non-commercial use (Section 90(1)(viii)).
Anti-competitive Remedies: If the license is granted to address anti-competitive practices, the licensee may be permitted to export the patented product (Section 90(1)(ix)).
Restrictions on Importation
General Prohibition on Importation: The license does not allow the licensee to import the patented article or an article made by a patented process from abroad if such importation would infringe the patentee's rights (Section 90(2)).
Exception by Central Government Direction: In the public interest, the Central Government can direct the Controller to authorise a licensee to import the patented article or substance, subject to conditions related to royalty, quantity, sale price, and the period of importation (Section 90(3)).
Objective for Granting Compulsory Licencing
The basic objective of granting a compulsory licence is to prevent the patentee from not fulfilling the reasonable requirements of the public, not those of particular individuals.
The inability to supply the patented article or refusal to grant a licence to a particular individual would not necessarily amount to default in supplying the patented article or refusal to grant licences within the meaning of section 90.
Therefore, to establish a case for compu lsory licence, the applicant will have to prove not only default towards him/herself, but default towards the public in general(Robin Electric Lamp Co Ltd's Appln. 32 RPC).
Since the provisions of section 84 are mainly for the benefit and protection of the public, the Controller or the Court wi ll look first to the interest of the public and not to that of the individual.
Section 91 provides that at any time after the sealing of a patent, any person who has the right to work any other patented invention either as patentee or as licence thereof, exclusive or otherwise, may apply to the Controller for the grant of a licence of the first patent.
He/She can apply on the ground that he/she is prevented or hindered without such licence from working the other invention efficiently or to the best advantage possible(F. Hoffmann-La Roche Ltd. & Anr. v. Cipla Lid. (2012) )
Compulsory Licences On Notification By The Central Government
If the Central Government is satisfied that in respect of any patent or class of patents, compu lsory licences should be granted in the public interest to work the invention at any time after sealing, it may make a declaration to the effect in the Official Gazette.
The effect of such declaration will be that the Controller will grant licences in respect of such patents, to any person interested, in an application being made to him/her.
In settling the terms of the licence, the Controller will endeavour to secure that the articles made under the patent shall be avai lable to the public at the lowest prices, consistent with the patentee deriving a reasonable advantage from the patent rights.
Section 92: Compulsory Licences in Emergencies
Under section 92, the Central Government upon being satisfied that a compulsory licence be granted upon a patent because of the circumstances arising out of national emergency/extreme urgency/public non-commercial use, then it shall grant such licence at any time after the grant of the patent.
Declaration by Central Government: The Central Government can declare, through the Official Gazette, that compulsory licenses should be granted for any patent or class of patents in the public interest, at any time after the patent has been sealed.
Controller's Role: Following such a declaration, the Controller is mandated to grant compulsory licenses to any interested person who applies for it.
Terms of License: The Controller aims to ensure that the articles produced under the patent are available to the public at the lowest prices possible, while still allowing the patentee to gain a reasonable advantage from their patent rights.
National Emergency, Extreme Urgency, and Public Non-Commercial Use: Specifically, Section 92 allows for the immediate grant of compulsory licenses without the normal procedural requirements in cases of national emergency, extreme urgency, or for public non-commercial use. This includes health crises like AIDS, tuberculosis, malaria, and epidemics.
Section 92A: Compulsory Licenses for Export of Pharmaceuticals
Section 92(A) provides for grant of compulsory licensees for the export of patented pharmaceutical products in certain exceptional circumstances. Under this provision, compulsory licence shall be available for manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems.
Export to Countries with Insufficient Manufacturing Capacity: Section 92A provides for the grant of compulsory licenses for the manufacture and export of patented pharmaceutical products to countries that lack or have insufficient manufacturing capacity in the pharmaceutical sector to address public health problems.
Conditions for Grant: The grant of such a compulsory license is subject to the condition that the recipient country has granted a compulsory license for the import of the pharmaceutical product or has otherwise allowed its importation from India.
International Framework
Section 92, beneficial provision can be really helpful in the case of emergencies. This section is based on the principles enshrined under Article 31 of TRIPS which enables the member countries to allow the patent for use by the government, or third parties authorized by the government. Such authorization should be considered on individual merits.
Doha Declaration of 2001 emphasised the need to address public health issues around the world, especially in developing nations.
TRIPS Agreement and Doha Declaration: These provisions are in line with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and are reinforced by the Doha Declaration on the TRIPS Agreement and Public Health (2001), which emphasises the flexibility of TRIPS Member States to tackle public health problems effectively.
Application and Interpretation: Given the lack of a specific definition for terms like "national emergency" and "extreme urgency" within the Act, these terms are subject to judicial interpretation. The application of these provisions, such as during the COVID-19 pandemic, highlights their potential as a tool to address vaccine inequity and other public health emergencies.
Section 92 and Section 92A underscore the balance the Indian Patents Act seeks to maintain between protecting patent rights and addressing urgent public health needs. By enabling the rapid mobilisation of crucial pharmaceuticals in emergencies, these provisions play a vital role in global and national public health responses.
Termination of Compulsory Licensing
Termination of compulsory licence is provided in section 94, on an application of the patentee or any other person deriving interest from the patent, if the Controller is satisfied that the circumstances that gave rise to the grant of compulsory licence no longer exist. In considering such termination application, the Controller will hear the licensee and ensure that the rights of the licensee are not unduly prejudiced.
References:
https://ipindia.gov.in/writereaddata/Portal/ev/sections/ps84.html
https://ipindia.gov.in/writereaddata/Portal/ev/sections/ps92.html
Patent Law by P Narayanan
PATENT LAW AND PRACTICE MADE EASY by Nagesh Kuchibhotla
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