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COMPULSORY LICENSING UNDER PATENT LAW

Updated: Feb 20, 2022

Written by: Navya Mallela



INTRODUCTION


A compulsory licensing is a legal provision provided for in Article 31[1] of the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS) of the WTO. Compulsory licences are defined as "authorizations for a third party to produce, use, or sell a patented invention without the permission of the patent holders." Compulsory licensing is expressly stated in Chapter XVI of the Indian Patent Act, 1970[2], and certain requirements must be met in order for a compulsory licence to be issued. These conditions are set out in Sections 84[3] and 92[4] of the Act. India’s first compulsory license was granted by the patent office to Narco pharma Ltd for producing a generic version of Bayer Corporation’s patented medicine Nexaver.


COMPULSORY LICENSING – MEANING & RATIONALE


Compulsory licences are "state-imposed or executed involuntary arrangements between a willing buyer and a reluctant seller." Compulsory licences are essentially the abrogation of an IP right—an extra-ordinary legal instrument under which the state grants itself or a third party (usually a competitor) access to, manufacture, use, or sell an IP covered commodity or process without the IP owner's permission. Patents, derivative works, and other proprietary interests can be subject to obligatory and compulsory licences imposed by statute. The authority to pass legislation on compulsory patent licences arises from various international conventions, including the World Intellectual Property Organization's (WIPO) Paris Convention for the Protection of Industrial Property, whose relevant provisions were incorporated into the World Trade Organization's (WTO) Agreement on (TRIPS).[5]


TRIPS gives member states more leeway in resolving situations where there is a possible disagreement between competition policy and intellectual property law. Articles 31[6], 8[7]and 40[8] are particularly noteworthy. Members may "adopt initiatives appropriate to protect public health and nutrition, as well as to advance the public interest in sectors critical to their socio-economic and technological growth”. TRIPS also treats compulsory licences as an exception to the agreement's minimum provision that all member states grant a patentee exclusive rights for the duration of the patent. TRIPS is a series of rules that establishes a minimum level at which any member state can grant a compulsory licence. Compulsory licences are permitted in two situations: where the public interest is paramount or where patent rights are being used in an anti-competitive way.


The below are some examples of when compulsory licences will be granted under national laws:


  • The refusal to enter into a voluntary licence arrangement on commercially viable terms (e.g., in the German and Chinese patent laws).

  • Public interest (e.g., within the Swedish law)

  • Public health and nutrition (e.g., provisions within the French law)

  • A national emergency or a crisis that requires immediate attention.

  • Patent holders engaging in anti-competitive practices.

  • Dependent patents.

  • No or spare operating of the invention within the national territory.

COMPULSORY LICENSING UNDER PATENT ACT, 1970


Section 84 of the Act governs the granting of exclusive licences under patent law. Any person concerned may apply to the controller for a compulsory licence on a patent on any of the following grounds after the three-year period has passed from the date of grant of the patent.


  • That the reasonable requirements of the general public with reference to the patented invention have not been satisfied, or

  • The patented invention is not readily available to the general public at a reasonable cost, or

  • That the patented technology is not used within India's borders.


The application must provide a statement outlining the essence of the applicant's interest, as well as the prescribed specifics and evidence to support the application. If the controller is confident that all of the above requirements apply, he can issue a compulsory licence on whatever terms he sees fit.[9]


FACTORS TAKEN INTO ACCOUNT FOR THE GRANT OF COMPULSORY LICENSE


In considering the application, the controller is to consider the following factors:


  • The essence of the invention, the amount of time before the patent was sealed, and any steps taken by the patentee or any licensee to fully exploit the invention:

  • The applicant's desire to put the technology to good use by the general public.

  • The applicant's willingness to take on the burden of supplying funding and developing the innovation if the proposal is approved:

  • If the claimant has attempted to receive a licence from the patentee under fair terms and conditions and failed to do so within a reasonable timeframe as determined by the controller. This consideration would not need to be weighed in the event of a national disaster or other serious situations, or in the case of public non-commercial use or the creation of grounds for anti-competitive practises used by the patentee.[10]

The controller is not required to consider matters subsequent to the making of the application.


In F. Hoffmann-La Roche Ltd. And Another v. Cipla Limited[11] the court observed that the issue of prescription affordability at a reasonable price was addressed by mandatory licence requirements. The court could not overturn such legislative intent on the basis of untested concepts because the legislative intent was to award a monopoly to the patent holder for at least the first three years after the grant of the patent to allow it to recover the tremendous costs incurred in research and development of the device.


In Franz Zaver Huemer v. New Yash Engineers[12]The patentee's inability to use the patent was only a justification for issuing a compulsory licence to another person under section 84, according to the Delhi High Court, but the premises in section 84 had not been considered grounds of defence under Section 107[13] in a suit brought by the patentee.


Procedure for dealing with applications for grant of compulsory licenses or revocation


When the controller is confident that a prima facie argument has been made out for the making of an order after considering an application under section 84 or 85, he directs the claimant to serve copies of the application on the patentee and all other interested parties. The submission must be published in the official journal by the dispatcher within the specified period or the extended time, the patentee or any other party may give notice of opposition. When a notice of opposition is filed, the controller must contact the petitioner and provide both the applicant and the opponent with an opportunity to be considered before making a decision.[14]


Powers of Controllers in Granting Compulsory license


If the controller determines on an application for a compulsory licence under Section 84 that conditions imposed by the patentee on the grant of licences under the patent, or on the acquisition, employ, or use of the patented item or method, preclude the manufacture, use, or selling of materials not covered by the patent, he may order that the grant of licences be made unrestricted. If a licence holder makes an application under the patent, the controller may order the existing licence to be cancelled or amended if he makes an order for the issuance of a licence to the applicant.[15]


Advantages of CL


1. People in developing or underdeveloped countries face major affordability issues; therefore, the issuance of CL will serve as a facilitator of regulated drug prices.

2. At times, the patentee would not allocate enough time and effort to the invention. This prevents the technology from reaching the largest number of people. In such instances, CL acts as a check and balance.

3. Because of the CL provision, countries are well prepared to manage emergencies, guaranteeing sufficient supply to the affected population.

4. CL is responsible for the rise in generic drugs.

5. By the provisions of CL, it has brought the world together on a common forum where nations can lend a helping hand to one another in times of need.


Terms and Conditions of Compulsory Licenses


Section 90 specifies the terms and conditions on which a compulsory licence can be granted. The controller shall make every effort to secure that when settling the terms and conditions of a permit for the issuance of a compulsory licence.


  • The royalty and other remuneration, if any, reversed to the patentee or any party beneficially entitled to the patent is reasonable, taking into consideration the essence of the invention, the costs incurred by the patentee in creating or producing the invention, securing, and maintaining a patent, and other related factors:

  • The person to whom the licence is given works the patented invention to the fullest extent possible and with a fair profit:

  • The issued licence is a non-exclusive one:

  • The licensee's right is non-transferable.

  • If a shorter term is in the general interest, the licence is for the remaining term of the patent:

  • In compliance with section 84(7)(a), the licence is issued primarily for the purpose of supplying the Indian market, but it can also be used to sell the proprietary product if necessary.

  • In the case of semiconductor technology, the licence given is for the purpose of working on the invention for non-commercial use by the general public: If the licence is issued to correct anti-competitive conduct identified by a judicial or regulatory review, the licensee may be allowed to export the copyrighted product if necessary.

No licence issued by the controller authorises the licensee to import the patented article or a product or item created by a patented process from another country where such importation would be an infringement of the patentee's rights without any permission.


However, in the public interest, the central government can order the controller to permit any licensee in respect of a patent to import the patented article or an article or product created by a patented method from another country at any time. The controller shall, thereafter, give effect to the aforesaid directions.


Compulsory License for exporting patented Pharmaceutical products


The Patents (Amendment) Act of 2005[16] added section 92 A to the Patents Act of 1970, which states that a compulsory licence can be granted for the manufacture and export of patented pharmaceutical products to any country with insufficient or no manufacturing capacity in the pharmaceutical sector for the product in question to address public health problems if a compulsory licence has been granted. The controller shall issue a compulsory licence solely for the manufacture and sale of the concerned pharmaceutical product to such country upon receipt of an application on such terms and conditions as he must specify and publish.


Termination of Compulsory License


A compulsory licence issued under section 84 can be revoked by the controller on the application of the patentee or any other individual deriving title or interest in the patent, if and when the conditions that led to its award no longer exist and are unlikely to recur. However, the holder of a compulsory licence has the right to object to any termination. When evaluating an application, the controller must ensure that the interests of the individual who was previously granted the licence are not jeopardised.[17]


CONCLUSION


This era is expected to present further difficulties in terms of CL grant/rejection for more patented medicines. More competition between Indian pharma behemoths and broader MNCs is yet to be seen. Compulsory licences under patent law and the enforcement of anti-competitive licence refusals address various issues and perform complementary roles. The laws governing compulsory licences in India stipulate a stringent reading of the certificate in order to issue the licence. However, there is no allowance for strict application of the patent law.

[1] Article 31: others use without authorization of the right holder. [2]Indian patent Act 1970 [3] Section 84 of the Patent Act [4] Section 92 of the Patent Act [5] Basheer, Shamnad “India’s Tryst with TRIPS: The patents ( Amendments Act, 2005”, Vol. 1, THE INDIAN LAW OF JOURNAL AND TECHNOLOGY, 1242,1257 (2005). [6]Article 31: Other use without authorization of the right holder [7] Article 8 Of TRIPS [8]Article 40 of TRIPS [9]CORNISH, W.R., INTELLECTUAL PROPERTY: PATENTS, COPYRIGHTS, TRADEMARKS AND ALLIED RIGHTS, (3rd.ed, Universal Law Publishing Co. Pvt. Ltd., New Delhi, 2002) [10]NARAYAN,P., INTELLECTUAL PROPERTY LAW, (New Delhi, 3rd ed; Eastern Law House, 1998). [11]2009 (40) PTC 125 (Del.) [12]AIR 1997 Del 79 [13] Section 107 of the Patent Act [14]Section 87: Procedure for dealing with applications under sec 84&85. [15] Section 88: Powers of controllers in granting compulsory licenses. [16] The patent ( amendment ) Act 2005 defines what invention is and makes it clear that any existing knowledge or thing cannot be patented. The provision defines that a novelty standard – which, along with non-obviousness or inventive step and Industrial applicability, are the three prerequisites for patentability. [17] Section 94 of the Patents Act, 1970

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