COMPULSORY LICENSE IN PATENT

B.A. LL.B. (INTEGRATED LAW DEGREE COURSE)

INTELLECTUAL PROPERTY LAW (VI SEMESTER)

“PROJECT WORK”

“COMPULSORY LICENSE IN PATENT”

SUBMISSION TO: SUBMITTED BY:

MR. MEENAKSHI DAHIYA VIVEK GAHLYAN
FACULTY OF INTELLECTUAL PROPERTY LAW 17RU11032
DESIGNATION: ASSISTANT PROFESSOR SESSION:-2017-2022
SEMESTER:-VI

1|Page
 COMPULSORY LICENSE IN PATENT

ACKNOWLEDGEMENT

I take this opportunity to express our humble gratitude and personal regards to MISS
MEENAKSHI DAHIYA for inspiring me and guiding me during the course of this project work
and also for her cooperation and guidance from time to time during the course of this project
work on the topic “COMPULSORY LICENSE IN PATENT”.

Date of Submission: 18-04-2020

Name of Student: VIVEK GAHLYAN

2|Page
 COMPULSORY LICENSE IN PATENT

Table of Contents

INTRODUCTION....................................................................................................................4

GROUNDS FOR GRANTING COMPULSORY LICENSE...............................................5

Revocation of CL:....................................................................................................................6

Termination of CL...................................................................................................................6

Special provisions for the grant of CL:..................................................................................7

Advantages of CL:................................................................................................................7

IMPORTANT DISCLOSURE MANDATED BY THE PATENT OFFICE TO

FOLLOW:................................................................................................................................9

CONCLUSION.......................................................................................................................11

3|Page
 COMPULSORY LICENSE IN PATENT

INTRODUCTION

Compulsory licenses are generally defined as "authorizations permitting a third party to

make, use, or sell a patented invention without the patent owner's consent." Under Indian
Patent Act, 1970, the provision with regard to compulsory licensing is specifically given
under Chapter XVI. The conditions which need to be fulfilled in order for a compulsory
license to be granted are laid down under Sections 84 and 92 of the Act. As per Section 84,
any person who is interested or already the holder of the license under the patent can make a
request to the Controller for grant of Compulsory License on patent after three years from the
date of grant of that patent on the existence of conditions mentioned in the Section 84 of the
Patents Act, 1970. While granting the compulsory license, the Patent office will consider few
measures such as the nature of the invention, any measures already taken by the patentees or
any licensee to make full use of the invention, ability of the applicant to work the invention to
the public advantage and time elapsed since the grant of the patent i.e. worked or not worked.
Compulsory licenses are in essence, government authorizations which allow a third party to
make, use, or sell a patented product without the consent of the patent owner. Provisions
regarding compulsory licensing are provided for under both the Indian Patent Act, 1970, as
well as the TRIPS (Trade Related aspects of Intellectual Property Rights) Agreement in the
international level. Compulsory licenses are granted for a variety of reasons such as
prevention of abuse of the patent to form a monopoly, addressing public health concerns, etc.

4|Page
 COMPULSORY LICENSE IN PATENT

GROUNDS FOR GRANTING COMPULSORY LICENSE

The section 84 (1) of the Indian patents act, 1970 states the conditions for compulsory
licensing as follows:
At any time after the expiration of three years from the date of the grant of a patent, any
person interested may make an application to the Controller for grant of compulsory license
on patent on any of the following grounds, namely: —
a. that the reasonable requirements of the public with respect to the patented invention
have not been satisfied, or
b. that the patented invention is not available to the public at a reasonably affordable
price, or
c. that the patented invention is not worked in the territory of India.

The grounds for granting compulsory license (CL) is explained in the context of the first
compulsory license case in India which is popularly referred to as the Bayer vs Natco case
(The CL was granted in the favor of Natco pharmaceuticals based in India against Bayer
pharmaceuticals based in the US of A.) for the anti-cancer drug Nexavar.

THE REASONABLE REQUIREMENTS OF THE PUBLIC WITH RESPECT TO PATENTED

INVENTION HAVE NOT BEEN SATISFIED: Bayer pharmaceuticals is believed to have admitted
that the controller found only 2% of the total number of cancer patients (Kidney and liver for
which Nexavar is used) had an access to the drug.

THE PATENTED INVENTION IS NOT AVAILABLE TO THE PUBLIC AT A REASONABLY

AFFORDABLE PRICE: The drug was found to have been sold at a whooping price of 2.8 lakh
INR (for a month-long therapy). It was concluded that many patients did not intend to
procure this drug purely due to the pricing issues.

THE PATENTED INVENTION IS NOT WORKED IN THE TERRITORY OF INDIA: This means that
the drug should be manufactured to a reasonable extent in India and mere importation of the
drug within the Indian Territory does not amount to sufficient working. (Since majority of
India’s drug market is based on importation of drugs, though this clause was weak but with

5|Page
 COMPULSORY LICENSE IN PATENT

the combination of the earlier two clauses satisfied the need for compulsory licensing of
Nexavar).

If the patentee is able to prove that the reasons for not working the invention adequately was
justifiable, then the grounds may not be applicable for the grant of CL. Upon the grant of CL
an existing license on the patent may be revoked or amended into a CL.

An important clause which is to be considered for issuing CL is the royalty aspect. It is highly
essential that the commercial rights of the patentee are not compromised. The onus lies on the
patentee to submit necessary evidence regarding the expenditure incurred in making the
invention, developing it, obtaining a patent, and its maintenance. This entitles the patentee for
adequate royalty upon a CL been issued to the product. Further, it is equally important for the
controller to ensure that the applicant who gets the compulsory license is able to work the
invention to the fullest extent i.e. justify the ground on which the CL was given to the patent.

REVOCATION OF CL: 

The revocation of a CL may be done by the controller as per the section 89 of the Indian
patents act, 1970 on the grounds of non-working of the invention. But, after having worked
the invention for a minimum of twelve-month period if the licensee feels that the grounds on
which the CL was granted needs an amendment, then an appeal regarding the same may be
put forth to the controller for revising the terms for better working of the invention.

TERMINATION OF CL:

The CL once granted is liable for termination under sec 94 of the Indian patents act, 1970
provided the controller is convinced that the conditions which were taken into consideration
to issue CL no longer exist and the possibilities of recurrence of such contingencies are bleak
or unlikely. While terminating the CL it is essential for the controller to take into
consideration that the interest of the license holder is not compromised. Also, the CL holder
has the right to appeal against the application for termination of CL.

6|Page
 COMPULSORY LICENSE IN PATENT

SPECIAL PROVISIONS FOR THE GRANT OF CL:

Section 92 of the Indian patent act, refers to special provision for compulsory license upon
notification by the central government. The three clauses considered for the same are:
1. When a circumstance of national emergency arises.
2. When in a state of extreme urgency.
3.  When there is a case of public non-commercial use.

The most common example for the above-mentioned clauses are cases of epidemics or health
crisis like AIDS /HIV which grip a nation. During these times it becomes highly essential for
the government to procure, disseminate and store the essential drugs. It requires negotiations
with the branded drug manufacturers of the required drugs to permit the generic
manufacturers to manufacture the same (non-commercial use). In such cases the central
government comes into action for catering to immediate requirement of the nation.

Similarly, section 92-A of the Indian patents act, 1970 grants CL for export of patented
pharmaceutical products in certain exceptional circumstances where a country has very little
or no manufacturing capacity of a pharmaceutical product to address the requirement of their
public then, upon a notification by such country the required pharmaceutical product may be
allowed to be imported from India on the orders of the controller.

Advantages of CL:

1. Developing or under developed nations have serious affordability issues among their
population, thus issue of CL would may act as a facilitator of regulated drug prices.
2. Sometimes, the patentee would not work on the invention sufficiently and completely.
This does not allow the invention to reach the population to the fullest extent. CL acts
as a check and balance in such cases.
3. Contingencies are well handled by the countries due to the CL provision, thus
ensuring adequate supply to the affected population.
4. The growth of generic drugs can be attributed to CL.

7|Page
 COMPULSORY LICENSE IN PATENT

5. It has brought the world on a single platform where the nations can render a helping
hand to each other in the time of need through the provisions of CL.

ON THE CONTRARY, CL COMES WITH ITS OWN SNAG:

1. Normally when a nation issues CL, it reflects on its ease to accommodate foreign
investors and leads to a notion that the nation is non-patent friendly.
2. The above point may have a cumulative effect on the investment opportunities.
3. Normally the countries issuing CL are believed to be weak in their IP regime as they
frame their laws favouring themselves.
4. Discouragement of research and development has been a long-standing argument
against CL as research needs investment opportunities.
5. Patentee whose product has been issued CL is dissatisfied when it comes to royalties
as they can never be compared to the expenditure incurred by in making the
invention, developing it, obtaining a patent and its maintenance.
6. CL transfers the lead from the branded manufacturer to the generic manufacturer thus
leading to price wars amongst the generic manufacturers.
Innovation is the lifeline of patents. Encouragement to innovate and advocating research and
development are needed for growth and development of an individual, a country, and the
world in whole. With growth and development come loads of challenges especially when it
comes to research, development, and pricing of the inventions. Though compulsory licenses
are believed to compromise exclusive ownership but, they act as a barricade against
monopoly rights. It should be kept in mind that though the compulsory licenses may be
issued but they should not act as a deterrent to growth and development.

8|Page
 COMPULSORY LICENSE IN PATENT

IMPORTANT DISCLOSURE MANDATED BY THE PATENT OFFICE TO FOLLOW:

In reviewing the compulsory license case, there is one more section which is very important
for the CL in India. Section 146(2) of the Patents Act, 1970 read with Rule 131 of the Patent
Rules, 2003 compels every patentee and her licensee to make an annual disclosure as to how
far and to what extent they have commercially worked their patent 6. In this respect recently,
Delhi High Court issued notice to the Government of India in a PIL (Public Interest
Litigation) filed by the petitioner 7. This notice has been issued because most of the major
pharma MNC's routinely violate patent working norms and the Indian Patent office has not
taken any step in violating such norms to these companies. Before going further, there is a
need to understand how section 146 related to the compulsory license. As per section 146(2)
of the Patents Act, 1970 every patentee and her licensee have to make an annual disclosure as
to how far and to what extent they have commercially worked their patent in India or abroad.

SECTION 146: POWER OF CONTROLLER TO CALL FOR INFORMATION FROM PATENTEES

(1) The Controller may, at any time during the continuance of the patent, by
notice in writing, require a patentee or a licensee, exclusive or otherwise, to
furnish to him within two months from the date of such notice or within such
further time as the Controller may allow, such information or such periodical
statements as to the extent to which the patented invention has been
commercially worked in India as may be specified in the notice.
(2) Without prejudice to the provisions of sub-section (1), every patentee and
every licensee (whether exclusive or otherwise) shall furnish in such manner
and form and at such intervals (not being less than six months) as may be
prescribed statements as to the extent to which the patented invention has been
worked on a commercial scale in India.
(3) The Controller may publish the information received by him under
subsection (1) or sub-section (2) in such manner as may be prescribed.

In our Patent laws section 146 i.e. working statement plays an important role at the time of
compulsory licensing cases. With the help of working statement [which are required to be

9|Page
 COMPULSORY LICENSE IN PATENT

filed before the expiration of 31st March of every year] the details provided by the Patentee
or their licensee one can estimate whether the patentee has fulfilled the reasonable
requirements of the public by inter alia selling the patented product at an affordable price or
at higher price violating the section 84 (1)(b) of the Patents Act. This information played a
critical role in the Lee Pharma Ltd. Versus AstraZeneca and Bayer vs. Natco compulsory
licensing dispute, where these details helped the Controller in getting the decision related to
grant or rejection of Compulsory license when applied. In the first grant of CL application,
Natco obtained the details from the working statement filed by the Bayer that its super
expensive patented drug for kidney/liver cancer was reaching just about 2% of the patient
population and sold at a very high price violating the section 84 norms of the Patents Act.

In this way, if the patentee fails to fulfil this important statutory information, the penalty in
the form of compulsory licensing and revocation of Patent will come and this will take such
companies in loss of Patent and also it is impossible to determine whether a patentee has
satisfied the reasonable requirements of the public, an important precondition for compulsory
licensing in India.

10 | P a g e
 COMPULSORY LICENSE IN PATENT

CONCLUSION

It is believed that this era will bring more challenges in terms of grant/ rejection of CL for
more patented drugs. More rivalry is yet to be seen between Indian pharma giants and larger
MNCs. The functioning of Indian Patent office in dealing with CL case will also bring more
clarity about the future of CL in India and the rules prevailed such laws in India.

In the present case, it is to be understood that the Controller has not fully denied the CL
application of Lee pharma rather the Controller has only informed the Lee pharma that they
have not made out the prima facie case for the order under Section 84. As per the notice
issued by the Controller, under Rule 97 (1), Lee pharma has one month from the date of
notification to request for the hearing, if it wants to proceed with the application and if
request for hearing is not made, Controller shall refuse the application.

Now it's time to watch how Lee Pharma prepare them for Grant of India's 2nd CL, the
Controller's final decision in grant or rejection of such compulsory license and the impact of
petition filed in respect of non-submission of working statement details to those companies
who are not following the proper submission of working disclosures.

11 | P a g e