Compulsory Licensing

Intellectual Property Rights consist of concepts whereby the novel innovations of individuals and
enterprises alike are protected, and the exclusive right of innovation is granted to the creator.
However, Compulsory Licensing is a contract of sorts which is executed between an unwilling
seller and a willing buyer. It is done with the agenda of ensuring that essential drugs are available
to all members of society1. Sometimes, this may not be possible due to lack of manufacturing
ability in the home country or the plain cost of the medication2.

Compulsory Licensing is the grant of a right of manufacturing given from an unwilling seller to a
willing buyer. Contained within Article 31 of the TRIPS Agreement and the respective signatory
nations’ own laws3, compulsory licensing is meant to ensure access to products that are necessary
for society at affordable rates. They are usually granted in cases where foreign companies
producing products such as pharmaceuticals for life threatening diseases do such at such high rates
that they become generally unaffordable to the generic public4. Though granted by the government,
Compulsory licenses do not deny patent holders the right to act against non-licensed parties5.

The general perception of developing nations is that that protection of intellectual property only
serves to assist the developed nations in maintaining their economic power and international
control. However, developing countries that make use of these flexibilities are scrutinized more
strictly6 in comparison to past compulsory licensing practices by Western European countries,

1
Bayer Corporation v Union Of India Writ Petition No.1323 OF 2013
2
Frost, Legal Incidents of Non-Use of Patented Inventions Reconsidered, 14 George Washington Law Review, 273,
435 (1945)
3
Choudhary, D.N., Evolution of Patent Laws, “Developing Countries’ Perspective” (1st Ed.) Capital Publishing
House, New Delhi, Pg. 13
4
Arnold G.J (1993), International Compulsory Licensing: The Rationales and the Reality, PTC Research Foundation
of the Franklin Pierce Law Center, IDEA: The Journal of Law and Technology.
5
Encaoua & Hollander, Competition policy and Innovation, 2002
6
Citing the high drug prices and its obligation to provide access to essential medicines, Thailand issued
government use (GU) orders for three drugs on the national essential medicines list: efavirenz (November 2006),
lopinavir/ritonavir (January 2007), and clopidogrel, a heart disease drug marketed as Plavix by BMS (January 2007).
The patent holders were entitled to a royalty of 0.5% of the total sales of the generic product. The GU authorized
the Governmental Pharmaceutical Organization (a Thai State-owned enterprise) to import or produce generic
versions of these products for non-commercial use in the public health sector. Initially the GU was used for
importation.
Canada and the US, where the pharmaceutical industry has reacted quite strongly against the
governments’ efforts to bring drug prices down7.

Under Indian law, The Patent Act 1970 of India (Section 84, 90) provided for compulsory licensing
of a patented invention. India has utilized both the Doha Declaration and the Patent Act in policy
work to provide for essential medication as seen in Roche v. Cipla8, which was the first ever order
in the history of Indian Patents Act where a decree was granted on the ground of public interest.

Compulsory licensing, while a necessity, has also given rise to countless anti-competition practices
along with a cutback in pharmaceutical profits due to export by CL produced drugs 9. Not only do
these setbacks damage company profits and create black market opportunities for trade, they take
away from investment funding that goes into the development of new medicines and new cures10.

7
On 4 May 2007, Brazil issued a compulsory license that would allow for the import and production of generic
versions of efavirenz. Despite numerous threats in the past, Brazil had never actually issued a compulsory license
for an AIDS drug. Before the compulsory licensing, Brazil had been paying US$580 per patient/year for efavirenz,
which comprised about 18% of the ARV budget that year. As a result of the compulsory licensing, the price will
come down to US$165 per patient/year, a considerably lower price than Brazil had been able to obtain through
negotiations.
8
Roche ltd & Anr. v Cipla ltd, FAO (O.S.) No. 188/2008
9
Rudolf V. Van Puymbroeck, GHAP, Exportation of Drugs under Compulsory Licenses: The WTO Decision on
Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health
10
Amanpreet Kaur and Rekha Chaturvedi, Compulsory Licensiing of Drugs and Pharmaceuticals: Issues and
Dillemas, Journal of Intellectual Property Rights, Vol. 20 Pg.279