This article has been written by Divya Bansal pursuing a Diploma in Domestic & International Commercial Arbitration from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Table of Contents

Introduction

“Avashyakta hi aavishkaar ki janani hai” is a common saying in India, meaning that “necessity is the mother of invention.” And whenever anything is invented anywhere in the world, it has to be protected from copying or unauthorised use. The solution to this challenge was to develop laws for the protection of intellectual property rights all over the world.

Download Now

Understanding the meaning of Intellectual Property Rights (IPRs)

Intellectual Property Rights (IPRs) are a set of rights provided to the person or company who owns a set of intangible assets that include invention, creation, or any kind of creative work in the field of knowledge and wants to protect such assets from copying, outside use, reproduction or implementation without authorised consent.

Brief overview of Intellectual Property Rights (IPRs) in India

With the rapid pace of technological, scientific, and medical developments all over the world, India does recognise the importance of laws to protect intellectual property rights. As a signatory member of the WTO agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), India has been constantly updating and developing several new legislations to meet the international obligation in regard to the protection of intellectual property rights. IPRs in India are governed by various laws, such as the Indian Copyright Act, 1957 (latest amended in 2012), the Trademarks Act, 1999 (latest amended in 2019), the Patents Act 1970, the Patents (Amendment) Rules 2023, and the Designs Act, 2000.

Importance of patents in encouraging innovation

A patent is an exclusive right granted to the inventor by the government to protect his invention from unlawful and unapproved copying, manufacturing, selling, or importing. The patent holder enjoys exclusivity on the usage of his invention and earns profits from that for 20 years from the date he filed for the patent. A patent holder can also grant the licence to others for the use of his invention in consideration of royalty or fees. Anything newly invented, if not patented, would be used freely by others and this would not bring any earnings or motivation to the inventor, so it is indeed important to protect the invention by getting a patent for it. It is an agreed fact worldwide that patents have increased the number of inventions in the fields of technology, bioscience, medicine, food, etc., which keeps inventors motivated as they enjoy exclusive rights, monopolies, and big earnings from licences and investors. Patents play a crucial role in encouraging innovation and fostering technological advancements. They provide inventors with exclusive rights to their creations for a certain period, offering several benefits that incentivize innovation.

  • Protection of intellectual property: Patents serve as a legal framework that safeguards the intellectual property rights of inventors. By granting exclusivity, patents prevent unauthorised use, copying, or imitation of inventions by competitors, ensuring that inventors receive due recognition and compensation for their efforts.
  • Financial incentives: Patents offer financial incentives to inventors and companies by allowing them to commercialise their inventions exclusively. The potential for profitable returns on investment encourages individuals and organisations to invest in research and development, leading to the creation of new technologies and products.
  • Market exclusivity: Patents provide market exclusivity, enabling inventors to establish a competitive advantage and secure a share of the market for their innovations. This exclusivity allows inventors to recoup their investment costs and generate profits, which further supports continued innovation.
  • Technology transfer and licensing: Patents facilitate the transfer of technology between inventors and companies. Patent holders can licence their inventions to other entities, leading to the dissemination of new technologies and their application in various industries. Licencing agreements also provide inventors with an additional source of revenue.
  • Collaborative innovation: Patents can promote collaborative innovation by encouraging joint ventures and partnerships between inventors, companies, and research institutions. The pooling of resources and expertise enables the development of more complex and groundbreaking inventions that might not be possible for a single entity to achieve on its own.
  • Economic impact: Patents contribute to economic growth and job creation. By fostering innovation and encouraging the commercialization of new technologies, patents stimulate economic activity and create employment opportunities across various sectors.
  • Public interest patents serve the public interest by ensuring that new and improved technologies are made available to society. The disclosure of inventions through the patent process contributes to the advancement of knowledge and the creation of a more technologically advanced and innovative world.

Patents are essential for encouraging innovation by providing inventors with protection, financial incentives, market exclusivity, and opportunities for collaboration. They play a vital role in driving technological progress, promoting economic growth, and benefiting society as a whole.

Introduction to compulsory licensing

Compulsory licencing is a legal provision where the government grants a licence to a third party, mainly for reasons of public interest or national emergency, to use the patent of the patent holder when he is unwilling to grant such authorization. This provision is mostly used in cases where it becomes difficult to access essential-use items or technology due to high prices or scarcity.

Legal framework for patents in India

The Indian patent regime has a journey of three phases: a period of colonisation, a period post Independence, and a period of globalisation.

Under British rule, the initial laws for patents were made and by the end of British colonisation in India, we inherited the Indian Patent and Designs Act, 1911.

In the Post-Independence period, on the recommendations of two committees: the Bakshi Tek Chand Committee in 1949 and the Justice Rajagopal Ayyangar Committee; India enacted the Patents Act, 1970. This law came into effect when there was a vast expansion of industrial growth, especially in the pharmaceutical industry, where Indian pharmaceutical and drug companies were exporting affordable medicines to different parts of the world.

After 1991, the Indian economy opened up globally. The liberalisation of industrial norms, import and export rules, etc. made India develop stricter patent laws and adhere to the WTO TRIPS agreement. During this phase, India brought various amendments to bring fundamental changes in product patents in technology, food, medicine, bioscience, and agrochemicals.

Explanation of the Patents Act, 1970

In Indian legislation, the patent system is governed by the Patents Act, 1970. This enactment aims to promote innovation, encourage inventions, and protect intellectual property rights. This act comprises 23 chapters with 163 sections in all. It provides for the criteria for patentability, procedures for filing and examination of patent applications, the rights and obligations of patent holders, compulsory licencing by the government, and remedies for infringement.

With scientific and technological advancement and to adhere to the guidelines of the Agreement of Trade-Related Aspects of Intellectual Property Rights (TRIPS) under the WTO, this Act of 1970 has been amended in 1995, 1999, 2002, and 2005.

ChapterNumberChapter TopicSection Numbers
CHAPTER IPRELIMINARY1, 2
CHAPTER IIINVENTIONS NOT PATENTABLE3, 4, 5
CHAPTER IIIAPPLICATIONS FOR PATENTS6, 7, 8, 9, 10, 11
CHAPTER IVPUBLICATION AND EXAMINATION OFAPPLICATIONS11A, 11B, 12, 13, 14, 15, 16, 17, 18, 19, 20,21
CHAPTER VOPPOSITION PROCEEDINGS TO GRANTOF PATENTS25, 26, 27, 28
CHAPTER VIANTICIPATION29, 30, 31, 32, 33, 34
CHAPTER VIIPROVISIONS FOR THE SECRECY OFCERTAIN INVENTIONS35, 36, 37, 38, 39, 40, 41, 42
CHAPTER VIIIGRANT OF PATENTS AND RIGHTSCONFERRED THEREBY43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53
CHAPTER IXPATENTS OF ADDITION54, 55, 56
CHAPTER XAMENDMENT OF APPLICATIONS ANDSPECIFICATIONS57, 58, 59
CHAPTER XIRESTORATION OF LAPSED PATENTS60, 61, 62
CHAPTER XIISURRENDER AND REVOCATION OFPATENTS63, 64, 65, 66
CHAPTER XIIIREGISTER OF PATENTS67, 68, 69, 70, 71, 72
CHAPTER XIVPATENT       OFFICE        AND       ITSESTABLISHMENT73, 74, 75, 76
CHAPTER XVPOWERS OF CONTROLLER GENERALLY77, 78, 79, 80, 81
CHAPTER XVIWORKING OF PATENTS, COMPULSORYLICENCES, REVOCATION82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 92A,93, 94, 95, 96, 97, 98
CHAPTER XVIIUSE OF INVENTIONS FOR PURPOSES OFGOVERNMENT99, 100, 101, 102, 103
CHAPTER XVIIISUITS CONCERNING INFRINGEMENT OFPATENTS104, 104A, 105, 106, 107, 107A, 108, 109,110, 111, 113, 114, 115
CHAPTER XIXAPPEALS TO THE APPELLATE BOARD116, 117, 117A, 117B, 117C, 117D, 117E,117F, 117G, 117H
CHAPTER XXPENALTIES118, 119, 120, 121, 122, 123, 124
CHAPTER XXIPATENT AGENTS125, 126, 127, 128, 129, 130, 131, 132
CHAPTER XXIIINTERNATIONAL ARRANGEMENTS133, 134, 135, 136, 137, 138, 139
CHAPTER XXIIIMISCELLANEOUS140, 141, 142, 143, 144, 145, 146, 147, 148,149, 150, 151, 153, 154, 155, 156, 157, 157A,158, 159, 160, 162, 163

Other than this statutory provision for patents there also exists a descriptive rulebook that provides updated guidelines for various procedures under patents by the name of Patents Rules 2003 which has been constantly amended.

Under Section 159 of the Patents Act, 1970 the Department for Promotion of Industry and Internal Trade the pursuant authority under the Ministry of Commerce and Industry has issued the Patent (2nd Amendment) Rules, 2024 intending to provide a uniform adjudication process and empower the Adjudicating Officer.

Criteria for granting patents

Section 3 in Chapter 2 of Patents Act 1970, discusses what is not an invention. It gets difficult to list out all those things that are inventions, but there is a definition of what cannot be an invention and this section provides for the criteria for obtaining a patent for a valid invention. The section provides an exhaustive list, so we will concise the points in a few important points as follows:-

  1. Novelty- The invention must be new and not known previously or disclosed on any public platform, anywhere in the world.
  2. Inventive nature- The invention must involve some innovative step, it must not be obvious to someone skilled in the relevant field of technology.
  3. Industrial usage- The invention must have the capability to be used in industry or for industrial purposes.
  4. Patentable subject-matter- The invention must not fall under the category of subject matter that has been explicitly excluded from patentability. The following are the categories:
  • Insignificant, impractical, and contrary to the natural laws.
  • Against public order and morality. To cause harm to life, health, and the environment.
  • Mere discoveries, arrangements, or duplications of already known substances, processes, or devices.
  • Methods of agriculture or horticulture, processes of medical treatment, plants, animals, mathematical or business methods, computer programmes or algorithms, literary or artistic works, and others as specified in the Act.
  1. Practical utility- The invention must have practical usefulness, which means it must serve some specific purpose or provide a tangible benefit.
  2. Not traditional knowledge- The invention must not merely represent traditional knowledge or an aggregation or duplication of known properties of traditionally known components.
  3. Compliance with patent office requirements- To obtain the patent, the inventor must comply with all the requirements and formalities set forth by the patent office regarding application submission, documentation, and procedures.
  4. Section 4 of Chapter 2 of the Patents Act, 1970, states that atomic energy related inventions are not eligible for patent protection as they fall under sub-section 1 of Section 20 of the Energy Act, 1962.

These criteria collectively determine whether an invention is eligible for patent protection under the Patent Act, 1970.

Duration and rights of patent holders

Section 53 of the Patents Act, 1970, states the “term of patent.” With the commencement of the Patents (Amendment) Act 2002, subject to the provisions, the term of every patent that is granted is 20 years from the date of filing the application for the patent. This section also talks about the international patent. The duration of any international patent that is sought under the Patent Cooperation Treaty (PCT), to which India is also a signatory, shall be 20 years from the international filing date.

Section 53 also talks about the renewal of patents by paying renewal fees. Once the patent is granted for 20 years, it becomes crucial to pay the renewal fees before the expiration of the second year and then for every subsequent year to the Patent Office. The patentee (Patent holder) can also pay the renewal fees in advance for two years. If the patentee fails to pay the renewal fees, then the protection for his patented innovation terminates, and the product is open to the public for use by the masses.

Under the Patents Act 1970, many sections provide various rights to the Patentee (patent holder), which allows them to have control over their inventions and potentially profit from them. Let’s get to see their rights in the following:-

  • Exclusive right to exploit the patent- Section 48 of the Patents Act 1970 mentions the exclusive right of the patentee where the subject matter is either the product or the method. Whether the subject matter is the product or the process, the patentee can prevent others from making, using, selling, or importing the product or the process without authorised consent. This way, the patentee can exploit the patent on the product/ process for potential profits and benefits.
  • Right to assign or grant licence- Section 69 & Section 70 of the Patents Act 1970 talk in detail about the right of the patentee to assign or grant a licence to a third party. If there are any co-owners of the patent, then all must consent to assigning or granting the licence, and the application for the same must be submitted in writing to the Patent Controller. The licence for the patent would be considered granted only once the patent controller authorises the request.
  • Right to surrender the patent- A patent holder can surrender the patent as per the provisions of Section 63 of the Patents Act of 1970. The patentee has to submit in writing his intention of surrendering the patent to the Patent Controller. Then the same is published in the official gazette and if this is opposed by any person, then the controller hears it. If there is no opposition, then it is communicated to all those parties who are interested in the same patent. Within a time limit, they can complete the formalities and get the patent transferred to them. Otherwise, the product is in the public domain.
  • Right to get a patent of addition- Chapter IX of the Patents Act 1970 provides for the sections related to a patent of additions made to the original invention. This part of the act allows the patentee to apply for the patent of any improvements, modifications, or additions made to the product/ process that was originally patented.
  • Right to seek redressal in case of patent infringement- Under Chapter XVIII of Patents Act 1970, a patentee (or assignee, licenccee, or agent) can file a civil suit in District Court or higher if he comes across the infringement of his rights for the obtained patent. When any third party is found to make, sell, use or import the patented product/ process without the authorised consent of the patentee, it is said to infringe/violate the exclusive rights of the patent holder. If the defendant fails to provide a defence and proves it, then the court may grant a permanent injunction or award for the damages.
  • Right to conventional application to go international- Section 133 under Chapter XXII of Patents Act 1970 defines “convention countries” as all those nations that are signatories, along with India, to any convention, agreement, or bilateral treaty. Section 135 of the act discusses Conventional Applications, where provisions are given for the patentee to apply for the patent for his invention in the conventional country.

Understanding compulsory licencing

With the preliminary information about patents and a little understanding of the Patents Act 1970 under the Indian Patent Regime, let’s go deep into the topic of compulsory licencing of patents in India.

Definition and purpose

The provisions for the “Compulsory Licence” are contained in Chapter XVI under sections 84-94 of the Patents Act 1970, to be read with rules 96- 102 of the Indian Patent Rules 2003.

Compulsory licencing is a provision provided in the TRIPS Agreement of the WTO  where the government authorises the third person or party, on the payment of certain fees payable at the Patent Controller’s Office, to use the intellectual property of the other person/ party without having authorised consent from them.

Under the Indian Patent Regime, a compulsory licence can only be issued after the completion of three years of the original patent granted. 

For national emergencies, extreme urgency, health crises, or public non-commercial use, the Central Government can authorise a compulsory licence after any time the patent is granted.

Licences that are issued by the patentee are “voluntary licences,” but licences that are issued by the government or patent authority against the will of the patentee are “ non- licences”. Hence, compulsory licences are non-voluntary in nature.

The mechanism of compulsory licencing bypasses the legal monopoly of the patent owner, though the patentee is compensated duly for this.

Recently, the COVID-19 pandemic has brought the compulsory licencing system into focus around the world.

Primarily, the purpose of such a provision is to balance the rights of the patentee with the public interest. It aims to ensure that essential inventions are available to the public at reasonable prices and that monopolies granted by the patents do not hinder innovation or access to technology.

For instance, the availability of pharmaceuticals and drugs at reasonable or low prices is one of the utmost requirements of the developing nations, but the developed nations oppose such licences as it makes it difficult for the big pharmaceutical companies to sustain their inventions.

Grounds for granting compulsory licences

Section 84 of the Patents Act clearly states that after three years of patent granting, the compulsory licence can be provided on the payment of some fees and sometimes also royalty to the original patent holder, only on certain grounds, as mentioned below:-

  • Failure to meet demand- when the patented invention has not been able to meet the reasonable demands/ requirements of the public, a compulsory licence can be granted.
  • Unaffordability of the Invention- in cases of non-availability of the patented invention at reasonable prices and becomes unaffordable to the public, then such a licence can be granted.
  • Non-exploitation of the Patent- a compulsory licence can also be granted when the patented invention has not been worked upon in India.

Procedures for applying for compulsory licencing

Under Chapter XVI of the Patents Act 1970, sections 84-94 give vast provisions and procedures for obtaining the compulsory licence of a patented invention by a third party. To make it easy to understand the provisions for applications for compulsory licencing, let’s make a pointwise list as follows:

  • Assessment of eligibility- Eligibility to obtain the compulsory licence for a patented invention is determined by the grounds provided under Section 84, which are already discussed above. 
  • Preparation of application- A comprehensive application is to be prepared by the applicant, including all required documents. The application should be duly filled with full details of the applicant, such as name and address, details of the patent concerned, an explanation of the reasons and facts on which the application is based to obtain the compulsory licence, and other relevant information to be provided as specified in the Patent Rules. 
  • Filling of application- The duly filled application in the prescribed format has to be submitted along with the prescribed fee to the Office of the Controller of Patents.
  • Notice to patentee- On the direction of the Controller, the applicant has to serve a notice of application to the patentee (holder of the patented invention) within seven days of the filing of the application. The notice must mention the details of the application and the grounds, reasons, and facts on which the compulsory licence is sought.
  • Publication- The Controller will then publish the application in the Official Journal of the Patent Office to invite any person interested to oppose the grant of a compulsory licence.
  • Period to oppose- A period of 3 months from the date of publication is provided for interested parties, including the patentee, to oppose the grant of the compulsory licence. If any opposition is received, then the controller will provide an appropriate opportunity to hear both parties before making the decision.
  • Controller’s decision- The Controller will make his decision to grant or not to grant the compulsory licence after considering all the representations and evidence provided by the parties in the hearing. If the Controller decides to grant the compulsory licence, then he will specifically mention the terms and conditions of the licence, including duration, scope, and royalty rates payable to the patentee.
  • Appeal- Either party aggrieved by the decision of the Controller may appeal to the Intellectual Property Appellate Board (IPAB) within the prescribed time limit.
  • Working of the licence for patented invention- If the compulsory licence is granted, the licencee must work on the patented invention to the fullest extent possible within a reasonable timeframe and at reasonable prices. The licencee must submit all periodic statements to the controller regarding the workings of the invention and the payment of royalties to the patentee.

Scope of compulsory licencing in India

Industries that fall under the compulsory licencing of patented inventions in India are listed below:-

  • Distillation and brewing of alcoholic drinks.
  • Cigars and cigarettes are made of tobacco and manufactured tobacco substitutes.
  • All types of electronic aerospace and defence equipment.
  • Industrial explosives include detonating fuses, safety fuses, gunpowder, nitrocellulose, and matches.
  • Hazardous chemicals.
  • Drugs and Pharmaceuticals (as per the Drug Policy)

Difference between applications filed under Sections 84 and 92 of Patents Act, 1970

Applications that are filed under Section 84 of the Patents Act, 1970 are considered for granting the compulsory licence of a patented invention because the circumstances that provide the grounds for the compulsory licence are widely classified as “abusive practices,” whereas under Section 92, the applications are filed based on “public interest” that caters to urgent/ emergent requirements.

Unlike applications under Section 84, applicants under Section 92 need not wait for the lapse of three years of the patented invention.

Further, under Section 92, the controller has discretionary powers to decide whether to follow the tedious procedure provided under Section 87 and provide a quick response. As per the Proviso for Section 87, when an application is submitted under Section 92 where the situation is related to AIDS, HIV, malaria, TB, or other epidemics, the controller is to inform the patentee to grant the compulsory licence ‘as soon as is reasonably practicable’. The same has also been mentioned in Article 31 of the TRIPS Agreement.

Compulsory licencing for the export of pharmaceutical products

Section 92A was inserted with the amendment in 2005, a.k.a. the Patent (Amendment) Act 2005. This section talks about making compulsory licences available for the manufacture and export of pharmaceutical products to countries lacking manufacturing capacity or facing severe public health issues under exceptional circumstances. The Controller determines the terms and conditions of the licence, granted only if the recipient country has authorised importation or issued a compulsory licence. This section also gives the meaning of ‘pharmaceutical products’ that are required to be mentioned to address public health issues, including diagnostic kits.

Termination of compulsory licence

Rule 102 of the Patents Rules 2003, outlines the procedure for applying for the termination of a compulsory licence under Section 94 of the Patents Act 1970.

The application must be made using Form 21 by the patentee or any person with a title or interest in the patent, accompanied by supporting evidence. The applicant must serve a copy of the application and evidence to the compulsory licence holder and inform the controller of the service date.

The licence holder has one month to file objections and provide evidence for the application. Further evidence or statements require special permission from the controller. The controller schedules a hearing, providing at least ten days’ notice to both parties. If the controller decides to terminate the compulsory licence, an order is issued, specifying any terms and conditions, and served to both parties promptly.

Landmark cases on compulsory licensing

Compulsory licencing in the Indian Patent Regime has always been a subject of important debate and scrutiny, especially when the context is to balance the interests of the patentee with those of public health and make available essential medicines. Various landmark case judgements have given shape to the interpretation and application of compulsory licencing provisions in India. These cases also provide insights into the ever-evolving legal framework and its impact on innovation and public welfare.

Natco Pharma vs. Bayer Corporation & Ors.

Facts

  • Natco Pharma Ltd. applied for a compulsory licence from the Patent Office to produce the generic version of Bayer Corporation’s patented medicine, sorafenib tosylate.
  • The patented medicine was used for liver (hepatocellular carcinoma [HCC]) and kidney cancer (renal cell carcinoma [RCC]) at advanced stages. 
  • Bayer marketed the medicine in India at a price of Rs. 2,84,000 per patient per month.
  • Natco Pharma requested a voluntary licence from Bayer to manufacture and sell the drug at a lower price, but Bayer refused.

Application for compulsory licence

Natco Pharma applied for the compulsory licence under Section 84 of the Patents Act 1970, the reason being the unavailability of the medicine to the public at large and its high price.

The decision by the Controller of Patents

The Controller of Patents granted the compulsory licence, considering the public health needs and constitutional right to health and life.

On the grounds provided in Section 84 of the Patents Act, the Controller found that Bayer failed to meet the public’s reasonable requirements and did not make the drug available at a reasonably affordable price.

Additionally, Bayer imported the drug into India but did not produce it within the country, failing to fulfill the working requirements of the patent.

Decision by the Intellectual Property Appellate Board (IPAB)

  • The IPAB upheld the decision of the Controller of Patents.
  • Natco Pharma was ordered to pay a royalty of 7% of net sales to Bayer Corporation.
  • Under the compulsory licence, Natco Pharma would produce and market the generic version of the drug sorafenib tosylate at a significantly lower price of Rs. 8,800 per patient per month.

Analysis of other past cases having an influence

BDR Pharmaceuticals International Pvt Ltd Vs. Bristol- Myers Squibb Co.

  • BDR Pharmaceuticals International Pvt Ltd. (Applicant) sought a compulsory licence for the Bristol-Myers Squibb Co. (Patentee) patented invention of the cancer drug Sprycel.
  • Description of the Drug- Sprycel contains dasatinib, is used for chronic myeloid leukaemia, and has Patent No. IN203937.
  • Dispute- BDR claimed the patented drug was priced at Rs. 2,761 per tablet, totaling Rs. 1,65,680 monthly and Rs. 19,88,160 annually. BDR proposed selling it at Rs. 135 per tablet and offering free medication to some patients.
  • The controller rejected the application for compulsory licence, stating BDR failed to demonstrate:
    • Without the approval of the Drugs Controller General of India (DCGI), BDR couldn’t use the drug for public advantage.
    • BDR didn’t make reasonable efforts to negotiate a licence with the patentee.
  • The controller disregarded the patentee’s attorney’s opinion as evidence against the patentee.
  • The controller emphasised that the ‘efforts’ must not be reasonable but rather absolute, inflexible, and without exceptions.
  • BDR made no credible effort to procure a licence from the patentee, nor could they portray the ability to use the patented invention for public wellbeing.
  • Result- The compulsory licence request was refused due to BDR’s failure to meet the regulatory requirements and inability to negotiate with the patentee.

Lee Pharma vs. AstraZeneca AB

Lee Pharma (Applicant) filed for the compulsory licence to produce AstraZeneca AB’s (Patentee) patented invention drug ‘Saxagliptin’ for Type II Diabetes Mellitus treatment, protected by patent number 206543.

Failed Negotiations: Lee Pharma requested for a voluntary licence, which was rejected by Patentee in 2014. Despite subsequent communications, no agreement could be reached within a year.

Controller’s observations:

  • Lee Pharma made sufficient efforts to negotiate a licence, meeting the requirement under Section 84 of the Patents Act of 1970.
  • Lee Pharma submitted data to show public needs were not met, but the Controller found the substitutes were available in the market, as against the claim of the applicant.
  • The price at which Lee Pharma planned to sell the medicine was against their claim of unaffordability, as the import costs were higher, due to which their argument proved weak.
  • Lee also failed to calculate the exact number of patients who were unable to access the drug, and this weakened their case even more.

Result

The compulsory licence was rejected due to Lee Pharma’s failure to assess the unfulfilled public needs and affordability issues, that mainly contradicted their suggested pricing.

Impact of the previous cases on the Indian patent regime

Promotion of access to medicines: Landmark cases of compulsory licencing have played an important role in advancing access to essential medicines in India. By permitting the pharmaceutical manufactures to produce generic medicines at lower prices than that of the originally patented drugs, compulsory licencing has fixed the concerns of affordability and availability, mainly for life-saving medications for diseases such as cancer, HIV/AIDS, etc.

Encouraging innovative R&D and pricing strategies: Compulsory licencing has been perceived as a limitation on patent rights but we can also not ignore the fact that it has fostered innovation by encouraging the patent holders to work on the pricing of their products so that these products can be reasonably made available to the masses. Due to the threat of compulsory licencing, pharmaceutical companies have been considering engaging in voluntary licencing agreements and adopting more fair and just pricing strategies.

Compulsory licencing, on the other hand, would encourage the production of generic medicines, which would increase the supply of medicines in the market, and due to competition in the market, the prices would go down.

Balancing patent rights and public health: Landmark cases have identified the importance of conciliation between protecting the patentee’s rights and safeguarding public health interests. The workable provisions to grant compulsory licences provided in the Patents Act 1970 address the issues of affordability, accessibility, and public welfare and hence reflect a progressive approach towards intellectual property rights.

International perspective on compulsory licencing

Due to the raising concerns for maintaining the equilibrium of patentee’s rights, which involve innovation and big investment, and the inferences for public health that involve society at large, the concept of compulsory licencing has grasped significant attention and has been a subject matter for debate on the universal platform.

Public health concerns

Many countries, particularly developing nations, that have been struggling to fight life threatening diseases, especially HIV/AIDS, cancer, tuberculosis, and malaria, favour the compulsory licencing system because it ensures access to affordable medicines.

To overcome the barriers that lead to high drug prices and patent monopolies, the mechanism of compulsory licencing is designed into law, eventually increasing access to essential medications for the masses in need.

Intellectual property rights and innovation

Most of the renowned pharmaceutical companies and developed nations adjudge the compulsory licencing as a challenge to their intellectual property rights.

Critics argue that the easy availability of compulsory licences may discourage innovations because it could discourage companies from investing in research and development, as patent holders would fear forcible licencing of their patents, which would deprive them of monopolies and profits generated from them.

International agreements and flexibilities 

Paris Convention- The Protection of Industrial Property

  • The Paris Convention aims to provide international protection for inventions.
  • Compulsory licences cannot be solely granted due to insufficient working of a patented product in a particular field.
  • Contracting states reserve the right to bring legislation for the grant of compulsory licences to prevent misuse arising from patent rights like selfish profit motives through monopolising the patented product.

Berne Convention- The Protection of Literary and Artistic Works 

  • It doesn’t address compulsory licencing specifically. However, Berne Convention does outline principles related to copyright protection and exceptions. It allows the contracting nations to implement their laws, including provisions for compulsory licencing if deemed necessary for public interest or fair use.
  • Article 11(2) allows countries to determine conditions for exercising rights, ensuring they do not infringe on moral rights or the right to equitable remuneration.
  • Article 13(1) permits countries to impose reservations and conditions on exclusive rights for musical and literary works, as long as they do not prejudice authors’ rights to fair compensation.

Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement

  • TRIPS, under the World Trade Organisation (WTO), regulates patents, copyrights, and trademarks.
  • Article 31 addresses compulsory licences, emphasising their authorization based on individual merits, efforts to obtain the patent, and limited duration of use.
  • The WTO framework provides guidelines and restrictions on compulsory licencing to establish a balance between patent protection and public health interests.
  • TRIPS allows member states to issue compulsory licences under certain conditions that may include cases of national emergency, public non-commercial use, and anti-competitive pricing strategies and practices.

Doha Declaration

  • The Doha Declaration addressed the issue of compulsory licencing ambiguity.
  • It clarified that each member could grant compulsory licences and determine the grounds for issuing them. It emphasised including national emergencies and public health crises as important grounds for seeking compulsory licences.
  • The declaration has recognised the challenges faced by nations with limited pharmaceutical manufacturing capacity and waived the “domestic market” restriction under certain conditions.
  • This waiver allowed countries without manufacturing capabilities to import pharmaceuticals through compulsory licencing mechanisms.
  • With public health as the utmost priority over IPR protection, the Doha Declaration aimed to strengthen compulsory licencing systems in developing and least-developed countries.

Economic and developmental impacts

The compulsory licencing system is significant for economic growth and industrial development in countries with limited manufacturing capacities. Countries that are developed, have vast manufacturing capacities, and invest hugely in innovations and R&D can earn royalties and fees for their patented products.

By enabling access to patented technologies or medicines, compulsory licencing can promote technological transfer, local production, employment opportunities, and economic development in beneficiary countries.

International cooperation and disputes

International cooperation and dispute resolution mechanisms are supreme in the scenario where the enactments of compulsory licencing lead to differences of thought between countries seeking the licence and the patent holding countries.

Organisations like the World Trade Organisation (WTO) play a pivotal role in mediating disputes to ensure that compulsory licencing complies with international agreements and principles.

To summarise, we can say that creating a compulsory licencing mechanism has to be done thoughtfully, with consideration to legal, economic, and ethical factors, so that governments can ensure that everyone can get important medicines at fair and just prices, and also that the promotion of innovation and protection of IPR can be encouraged.

Compliance of indian regulations with international standards

It becomes a crucial aspect for Indian rules and regulations to comply with international standards when it comes to an important part of IPR that is compulsory licencing, especially when the Indian economy is open to world economies and works hand in hand with them. Now let us examine India’s approach to compulsory licencing within the framework of international agreements and its impact on access to essential medicines and innovation.

  • Paris & Berne Conventions: India is signatory to both of these conventions and aligns its practices with international standards set forth. It recognises the importance of protecting intellectual property rights while also addressing societal needs, including public health concerns.
  • Implemantation of TRIPS Agreement: India’s compliance with the provisions of TRIPS Agreement regarding compulsory licencing is noticeable in its domestic laws and policies. This agreement mandates the member countries to grant patents for products or processes that are new, involve an inventive step, and are capable of industrial application.
  • Compliance with Doha Declaration: India complies with the principles outlined in the Doha Declaration. These principles emphasise interpreting TRIPS Agreement to support public health goals. The declaration agrees with the flexibility of TRIPS Agreement to address public health concerns, which also include the use of compulsory licencing to guarantee access to affordable medicines.
  • Amendments to domestic laws: India has amended its domestic patent laws time and again so as to comply with international standards. Indian government has emphasised the regular updating of the provisions related to compulsory licencing of pharmaceutical and agricultural chemical products.
  • Utilisation of compulsory licensing: Indian government utilises the mechanism of compulsory licencing to fight the challenges of public health and ensure access to essential medicines at affordable prices. India has facilitated the production and distribution of generic versions of patented drugs, by issuing compulsory licences so that they can be made available to its population.
  • International recognition: India’s approach to compulsory licencing has bagged recognition internationally for its efforts to balance intellectual property rights with public health priorities. Its utilisation of compulsory licencing provisions sets an example of leveraging flexibilities within international agreements to promote access to medicines.

From all of the above points, we can clearly extract that India plays a pivotal role in the world to address public health challenges and promote innovation in the pharmaceutical sector.

Challenges and controversies surrounding compulsory licencing

Compulsory licencing system has raised much debate and controversy in the realm of protecting IPRs and enhancing public health. In this part of the article, we will look into the challenges and controversies that surround compulsory licencing by examining industry concerns, striking a balance between public health and innovation, and determining the criticisms along with the suggestions for improvement.

Industrial concerns

Industries, especially pharmaceutical companies, are more concerned as they fear the potential abuse of the patents on their products and other IPRs. From their perspective, compulsory licencing undermines the very foundation of innovation by reducing incentives for research and development. Companies are deterred from investing in outstanding medical advancements due to the fear of low returns on investments. 

Furthermore, companies perceive compulsory licences as a threat, which has resulted in uncertainty in the market by demotivating innovation and restraining competition. Pharmaceutical companies argue that robust patent protection is essential for fostering a conducive environment for research and development, as it would create an environment for the commercialization of new drugs. Companies doubt for the progress of new medicines if there is no adequate protection for their inventions, which may lead to deprivation of life-saving treatments for patients.

Balancing public health and innovation

The subject of public health often clashes with the exclusivity conferred by patents and this becomes a big debatable issue. Proposers of a compulsory licencing system feel that it is necessary that the government intervene in the scenario where medicines are overpriced during public health emergencies so as to assure the masses of affordable treatments. 

Strategists face a huge challenge when it comes to balancing public health with the need to incentivize innovation. Though vital medicines will be available at lower prices with easy access by issuing compulsory licences,  we cannot ignore the risk of fewer investments in research and development. Striking the right balance requires a nuanced approach that acknowledges the legitimate concerns of both industry stakeholders and public health advocates.

Criticisms and suggestions for improvement

Critics of compulsory licencing reveal several shortcomings and areas for improvement. One of the major shortcomings is the potential for abuse by governments, which may treat compuslosry   as a political stunt rather than a genuine tool to address public health needs. These concerns become an even more serious issue to deal with when there is a lack of transparency and procedural ambiguities in the issuance of compulsory licences. 

Several suggestions have been recommended to overcome these criticisms and improve the effectiveness of compulsory licencing structure. Let us take a look at few suggestions:-

  • Administration and execution of clear criteria and procedures for issuing compulsory licences.
  • Security of transparent and accountable decision-making process
  • Provisions for sufficient incentives to the patentees for their innovation.
  • Regulations for the misuse of the licence.
  • Safeguarding the interests of patent holders when public health is not a priority.

These suggestions bring challenges and controversies to confuse the stakeholders about the risks involved. Only through thoughtful dialogue and collaborative efforts can we find the solution to this problem and look for a path forward that promotes the dual goals of innovation and public health.

Role of compulsory licencing during COVID-19 outbreak

Key points depicting the role of compulsory licencing during COVID-19 outbreak are as follows:

  • Increased demand and high prices: Worldwide demand for essential medicines surged during COVID-19 outbreak. The challenge to meet this urge was even greater in developing countries with limited manufacturing capacities. It was rather difficult to deal with the situation as the exclusive patent rights of some essential medicinal drugs resulted in high prices, which obstructed access for low-income individuals who were in dire need of medicines.
  • Compulsory licencing as a solution: To deal with the pandemic, many countries, including Canada, Germany, Ecuador and Chile, took steps to revive the legislation on compulsory licencing and facilitate its use. This mechanism allows for the production of essential medicines without infringing on patent rights, thereby enhancing access and affordability.
  • AbbVie’s decision on Kaletra: A U.S. drug maker named AbbVie impressively decided not to exercise its patent right for the antiretroviral drug Kaletra, which provided salvage to treat COVID-19. Such a voluntary action is the best example to signify that patent holders were not reluctant to provide help during global health emergency.
  • Flexibilities and challenges of the TRIPS Agreement: Article 31 of the TRIPS Agreement permits compulsory licencing primarily for domestic use, while Article 31bis allows for the export of pharmaceutical products produced under compulsory licences. Yet regardless of the TRIPS provisions, a few countries, including the United States and members of the European Union, chose to keep strict patent rights on the exports of essential medicines and withdraw the importation of such medicines, which raised concerns about the surprisingly high prices and unreachability of medicines globally.
  • WHO support for Costa Rica’s proposal: Costa Rica proposed to create a pool of rights for tests, medicines and vaccines related to COVID-19, which the World Health Organisation (WHO) also approved. Against the scope of traditional compulsory licencing provisions, this initiative aimed to overcome emergent health concerns by ensuring access to essential medical products globally.
  • The need for cooperative efforts: The pandemic of COVID-19 has given ample reasons to brainstorm for solutions to deal with the challenges that the world may face in the future. There is a global call for international cooperation and coordination to combat the patent issues of essential medical equipment and medicines so as to ensure global access during the outbreak of any other variant of COVID-19 or any other health emergency. To suggest a few solutions, countries should collectively create publicly backed funds, jointly procure patent rights and voluntarily pool intellectual property.

During the pandemic, compulsory licencing was in the news in India due to the demand to issue compulsory licences for the manufacture of an affordable generic version of Remdesivir, an anti-viral drug showing efficacy in treating COVID-19 patients. Such a demand arose when reports came that the USA had purchased the entire stock of Remdesivir for the next three months of the peak spread of the pandemic, limiting its availability to the rest of the world. With the cost of manufacturing Remdesivir significantly lower than the price set by Gilead Sciences, the patent holder, there are concerns about access to the drug during the pandemic.

The key points related to compulsory licencing in the Indian patent regime during the COVID-19 period are as follows:

  1. Legislative support for compulsory licensing: Several countries, including Canada, Chile, and Ecuador, have taken legislative steps to enable compulsory licencing as part of their response to the COVID-19 pandemic.
  2. TRIPS flexibilities: Countries can utilise provisions of the TRIPS Agreement to support public health needs, including issuing compulsory licences. TRIPS allows flexibility in using patent rights for public health emergencies.
  3. Legislative framework in India: India’s Patent Act 1970, specifically Chapter XVI, addresses compulsory licencing and the use and acquisition of inventions by the Central Government.
  4. Provisions for extreme urgency: Section 92 of the Patents Act empowers the government to grant compulsory licences under circumstances of national emergency or public non-commercial use.
  5. Court interpretation and limitations: The Delhi High Court has interpreted Section 84 of the Patent Act as allowing for compulsory licencing even before the expiration of three years from the grant of the patent in cases of public health crises.
  6. Constitutional considerations: The Indian Constitution, particularly Article 21 guarantees the right to life and personal liberty, and includes the right to good health, emphasising the importance of public health in legal decisions.
  7. Amendments for faster processes: Suggestions have been made for amendments to expedite the compulsory licencing process during emergencies, such as removing the application procedure under Section 84 to speed up access to essential medicines.
  8. Government empowerment: Patent Act and Patent Rules empower the government to use or acquire patents in cases of extreme urgency or national emergency without informing the patent holder, ensuring swift action to mitigate the crisis.
  9. Compensation and dispute resolution: The Act ensures adequate compensation to patentees in cases of compulsory licencing or acquisition by the government, with mechanisms for dispute resolution through the High Court.
  10. Bayh Dole Act Model: Suggestions have been made for India to adopt a model similar to the Bayh Dole Act, where the government funds research and development, ensuring both incentivization for innovation and affordability of life-saving drugs.

Compulsory licencing is seen as a stringent exception to patent rights, with criticism from pharmaceutical companies. However, it is deemed necessary during extreme urgencies to balance public interest and patentee rights. By working together, the global community can navigate patent issues and facilitate timely access to life-saving medical products for all populations affected by the pandemic.

Case studies other than pharmaceutical industry

Sugan Engineering (P) Ltd. vs. James Mackie Holdings Ltd.

Facts

Sugan Engineering applied for a compulsory licence under Section 84 of the Patents Act 1970, regarding the patentee’s invention related to “flyers” used in spinning machines, specifically in the jute industry. Sugan argued that the imported flyers were essential for the Indian jute industry, but their high prices made them inaccessible.

Sugan also accused the patentee of “tying,” claiming that flyers were sold only to those who purchased spinning frames from the patentee.

Findings

The Controller dismissed the patentee’s opposition, ruling that the patented flyers could be manufactured in India and the demand was not relevant. Continuous testing requirements were not disclosed in the patent specification, which could not be grounds for refusing a compulsory licence. The controller inferred that the patentee’s reliance on imports suggested a monopoly strategy, and the imported flyer prices were unreasonably high.

Refusing a licence to Sugan and limiting sales to purchasers of spinning frames amounted to an abuse of patent rights.

Decision

The controller lacked the authority to order the transfer of technical know-how in determining licence terms. A royalty of 3.5% of the net sales price of all devices embodying the patented invention was deemed reasonable.

The order allowing the application for a compulsory licence operated as a deed granting the licence under Section 98 of the Patents Act 1970.

Catalysts and Chemicals India (West Asia) Limited vs. Imperial Chemical Industries Ltd. (1977)

Facts

The patentees’ invention, related to the ‘catalysts and hydrocarbons steam reforming process using them’, was endorsed with the words ‘licences of right’ under Section 87 of the Patents Act 1970. The applicant sought permission from the patentee to work on the patent and offered to pay a royalty. Having received no response, the applicant made an application to the Controller under sections 88(4) and 88(2) of the Patents Act 1970.

The Patentee had been importing the patented invention into India and was now seeking permission to manufacture the catalyst through a subsidiary company. The applicant claimed to have the necessary technical expertise to work on the patent in India.

Patentee’s resistance

  • He argued that the invention had been wrongly endorsed with ‘licences of right’.
  • It was contended that only processes, not products, could be endorsed with ‘licences of right’.
  • Stated negotiations with another company, arguing against granting a licence.

Findings

The Controller held that the applicant was interested in obtaining a licence to work the patented processes, which entitled them to work, sell, use, make, or distribute the product. The controller clarified that there was no discretion to hear the patentee before endorsing the patent with ‘licences of right’. Negotiations with another party did not bar the grant of a licence under Section 88(2)

Decision

The Controller ordered the grant of the licence to the applicant at a 3% royalty on the ex-factory sale price of the catalyst.

Comments

An appeal was preferred from the controller’s decision to the Calcutta High Court.

Rail Udyog vs. Guest Keen Williams Limited

Facts

  • Rail Udyog applied for a compulsory licence under the patent for ‘Double Shaft Springy Track Spike’.
  • The exclusive licencee of the patent (the first opponent) initially opposed the application, but their opposition was dismissed due to lack of standing.
  • Guest Keen Williams, claiming to be an exclusive licencee derived from the first opponent, subsequently opposed the application.
  • The opponent, Guest Keen Williams, alleged that Rail Udyog lacked the technical expertise, financial back-up, and commercial ability to work on the invention.

Findings

  • The controller found that there were no opponent’s names in the register of patents.
  • Apparently neither the first opponent had any interest in the patent or the application, nor Guest Keen Williams, who claimed to be an exclusive licencee from the first opponent, had any interest.
  • The opponents failed to bring out any evidence to prove the inability of the Rail Udyog to work upon invention.
  • As a result, the controller decided to grant the compulsory licence to Rail Udyog.

Comment

The controller’s decision shows that its not too hard to prove the ‘ability’ to work upon invention.

Conclusion

Compulsory licencing is a significant tool to promote public health as it facilitates access to essential medicines and balances patent rights with societal needs. India complies with international standards and has a legislational setup for compulsory licensing which aims to address public health issues and encourage innovations. It emphasises the flexibility of licencing so that patentees get incentives for their patents when such a licence is issued.

The compulsory licencing system has evolved with time, as is evident from landmark cases and improvisations in legislative provisions. During the COVID-19 pandemic, the whole world recognised the importance of the compulsory licencing landscape.

Compulsory licencing is a challenging and controversial subject in IPR laws. It requires a meticulous approach to safeguard both the incentivization of innovations and public health interests. It’s not only the pharmaceutical industry that garners the concept of compulsory licencing; rather, it offers opportunities for technological transfer, economic development, and access to innovation in diverse sectors.

The protection of patents under IPR laws motivates innovation but many times it is seen that this legislation is misused as it leads to the enjoyment of monopolies and high prices for patented products, which affect underdeveloped and developing countries in particular. The development of compulsory licencing instruments plays a pivotal role in ensuring the accessibility of life-saving drugs so that governments can be empowered to deal with health crises efficiently. The TRIPS agreement plays a supreme role in protecting public health by deriving the concept of compulsory licencing. Few of its members took it seriously, while few realised its importance and developed the regulations during the COVID-19 pandemic. Yet there are some developed nations that contradict this concept.

India has set an example by saving billions of dollars annually by issuing compulsory licences for the manufacturing and distribution of generic substitutions of patented medicinal formulas. India has been successful in balancing innovation incentives like royalty for patents and making essential medicines available to the masses on life-saving treatments. Strict voluntary licencing and quality regulations are also vital for this success.

Though access to vital medicines is a significant result of compulsory licencing, critics acknowledge the issues of drug pricing and investment in research and development while highlighting the need for balanced regulations. The compulsory licencing system is a complex structure yet it proclaims clarity and equity in legal provisions that address barriers to drug accessibility effectively. Patent protection stimulates consistent R&D but it is not seen as the sole solution to the issues of monopolies and exuberant prices. Whereas compulsory licencing is also not enough to address the challenges of accessibility faced by the masses in developing countries.

Thus, to infer the conclusion of this article, we now know that there is a need for continuous amendments to the provisions of compulsory licencing. A comprehensive approach is required to ensure equitable access to medicines worldwide while incentivizing innovation.

References

RELATED ARTICLESMORE FROM AUTHOR

LEAVE A REPLY

Please enter your comment!
Please enter your name here