Riya Chadha, FIMT, IPU
Shreya Taneja, Amity Law School, Delhi (GGSIPU)
Shrey Goyal, NLUJAA
Meghaa G, TNNLU
Compulsory licenses are commonly described as 'authorizations authorizing a third party to make, use or sell a patented invention without the consent of the patent’s owner’. Chapter XVI of Indian Patent Act, 1970, explains the provision relating to compulsory licensing. The requirements to be fulfilled in order to be given a compulsory license are set out in Sections 84 and 92 of the Act. This article will deal in detail regarding the procedures, and conditions required for compulsory licensing.
Statutory Provisions Granting Compulsory Licensing
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 –
the reasonable requirements of the public with respect to the patented invention have not been satisfied
the patented invention is not available to the public at a reasonably affordable price
the patented invention is not worked in the territory of India.
Section 92 (A)
For exports, under exceptional circumstances in case of national emergency, extreme urgency of public non-commercial use by notification of the Central Government
Section 92A (1)
To a country which has insufficient or no manufacturing power in the pharmaceutical sector to address public health.
Compulsory licenses can also be issued suo moto by the Controller under Section 92, pursuant to a notification issued by the Central Government in case of either a "national emergency" or "extreme urgency" or in cases of "public non-commercial use".
Test For Compulsory Licensing
The test for compulsory licensing will be better understood with a few case laws, the complete details of which are found at the end of this article.
Nexavar Case, was the first Indian case where compulsory license was granted to Natco Pharma to manufacture and sell drug named Sorafenib. The reason behind such grant was high and unaffordable prices in India.
However, in the BDR Pharma Case, application for grant of license was denied by the Controller as the application was filed without following required process stated in Section 84 (6) of Patent Act 1970. The Controller also stated that word ‘effort’ and ‘reasonable’ should be according to mutual deliberation.
Further in LEE Pharma Case, compulsory licensing was rejected as they failed to produce necessary evidence and satisfy ground mentioned in Section 84(1) of the Indian Patent Act, 1970.
Considering the above cases, the following aspects will be taken into consideration before granting the Compulsory License to third party:
Following three tests apply to meet reasonable requirements:
(i) Whether in addition to the patented drug there is any alternative available for the same disease which is available to general public at reasonable cost;
(ii) If no alternative is available then to check whether the patented drug is available to general public by manufacturer or the patentee at reasonable cost;
(iii) Comparison of cost of proposed drug, patentee’s drug and alternative drugs.
As the Act mandates the filing of a statement of working every year, irrespective of the existing status of working in India, the requisite form should be filed with due diligence. If a patent has not yet been worked, the owner should mention what will be done in the near future.
The patentee may consider licensing, which must be exercised simultaneously if local manufacturing is not possible. Similarly, the patentee must address licensing queries raised by generic companies.
· The pricing of essential life-saving drugs should be considered by the patentee by strategically monitoring public need and economic status in India.
· The mandatory legal requirements for obtaining a compulsory license should be carefully considered.
Further, the Controller takes into account some more factors 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 license.
Procedure -Processing Compulsory Licensing Application
On filing the application for the grant of compulsory license apart from the evidences and relevant facts, the Controller analyses the prima facie case. After taking into account important factors such as nature of invention, applicant ability toward such invention and whether the efforts were made by applicant to obtain license from the patentee and if such effort fulfilled within reasonable period not exceeding six months then it is on the Controller to decide where to grant or reject such application for licensing.
In case the Controller is not satisfied with the application, notice will be issued regarding the rejection to the applicant and further giving the applicant a period of one month to request for hearing before Controller who will finally uphold his order of either acceptance or rejection.
If the Controller is satisfied, the application is published in Official Journal.
Terms And Condition Relating To Compulsory Licensing
Once the Controller agrees to grant compulsory license, he will set the required terms and conditions necessary in such licensing. Further, the Controller decides the royalty or remuneration payable to the patentee taking considering following factors:
(i) Patentee’s investment in his invention
(ii) Implementation of such invention
(iii) Whether such invention sold at reasonable price or not
(iv) Terms of license.
The license should be non-exclusive, non-assignable and should be for balance term and can be used for non-commercial purpose.
The Controller will also elucidate about the provisions relating to import and export of such patented item. The government if required for public interest may order the Controller to authorize licensee to patent to import the article which is patented abroad subject to conditions, royalty or remuneration, quantum of import and sale price of such imported article.
Opposition To Grant& Termination Of Compulsory License
The patentee can file the opposition for grant of such licensing within two months from such publication in official journal via Form 14.
The Controller has the power to terminate such grant via Form 21 if the circumstances under which the license was granted terminate to exist.
Related Case Laws
Bayer v. Natco
On 9 March 2012, the Patent Office granted India's first mandatory license to Hyderabad-based Natco Pharma, manufacturing a generic version of Bayer's Nexavar, an anti-cancer agent used in treatments for liver and kidney cancer.
In this, it was identified that only 2% of the cancer patient population had easy access to the drug and that Bayer marketed the drug at the exorbitant price of Rs. 2,80,000 for a month's treatment. The Patent Office also granted a mandatory license to Natco Pharma on the grounds that Nexavar was being imported into India, ensuring that the tablets would be sold for Rs. 8,880 per month. It was settled that Natco Pharma would pay 6% of the drug's net selling price to Bayer as royalties
BDR Pharmaceuticals International Pvt Ltd v Bristol-Myers Squibb Co
On 4th March 2013, the Controller dismissed BDR 's compulsory license application by stating that BDR had failed to give a prima facie case for granting the compulsory license. The Controller found that BDR had made no reasonable attempt to procure a license from the holder of the patent, nor had the applicant obtained the opportunity to operate the invention for public benefit.
Therefore, the compulsory license requirement for grant was denied.
In today's world, Intellectual Property Rights (IPR) have rapidly gained an important position within both international and domestic law. The compulsory licensing of patents, or, the process through which an individual or company seeking to use another's intellectual property can do so without seeking the rights holder's consent, and pays him a set fee for the license (which is premeditated), proves to be a step in the right direction. An exception to the strict rule of exclusive enjoyment of intellectual property is that compulsory licensing recognizes the trend of globalization and provides an avenue through which essential patented items such as medicines can still be reproduced.
In India, as we have already explored, there are many cogent conditions and tests that have to be met for the granting of a compulsory license under various Indian statutes. Especially in the context of such a time as the COVID-19 pandemic, we begin to understand how closely intricately connected the entire world is, and how a ripple that starts in the one part of the ocean, quickly travels all around, unaffected by man-made borders. And thus, while intellectual property must always be safeguarded and the inventor should be given due credit and incentives, it simply cannot come at the cost of human lives.
 The Indian Patent Act, 1970, No. 39, Acts of Parliament, 1970.  Bayer Corporation v. Union of India & Ors., Writ Petition No. 1323 of 2013.  M/s. BDR Pharmaceuticals International Pvt. Ltd. v. M/s. Bristol Myers Squibb Co., CLA No. 1 of 2013.  Lee Pharma Ltd. v. AstraZeneca, CLA No. 1 of 2015.  Pankaj Musyuni, Compulsory licensing: law, challenges and strategies, LEXOLOGY, https://www.lexology.com/library/detail.aspx?g=8efb1c00-65cd-4d66-8925-5ece8f8f2551.  Ibid.  Ibid.