In this blog post, Vikram Chaudhuri, Student of Department of Law, Calcutta University, and the Diploma in Entrepreneurship Administration and Business Laws by NUJS, analyze the concept of a compulsory license under the Patents Act, 1970.

What is a Patent?

The Patents Act, 1970 was amended three times in 1999, 2002, 2005 respectively to include the concept of ‘compulsory license’ and these are given in the sections 84-92 of the Indian Patents Act, 1970.

A patent is an exclusive right granted for an invention, whether it is a product or a process which gives a new technical solution to a problem, and this patent is granted for a specific period to the inventor.

What are ‘compulsory licenses’ under the Patents Act?

In simple terms, compulsory licenses are authorizations given to a third-party by the Government to make, use or sell a particular product or use a particular process which has been patented, without the need of the permission of the patent owner. The provisions regarding compulsory licenses are given in the Indian Patents Act, 1970 and in the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement at the International level. Although this works against the patent holder, generally compulsory licenses are only considered in certain cases of national emergency, and health crisis. There are certain pre-requisite conditions which need to be fulfilled if the Government wants to grant a compulsory license in favor of someone.

Under Indian Patents Act, 1970 the provisions of ‘compulsory license’ are specifically given under Chapter XVI, and the conditions which need to be fulfilled are given is Sections 84-92 of the said Act.

Section 84

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.

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 expiry of the three years, when the above conditions are fulfilled.

However compulsory licenses may also be granted, when –

1. Section 92 A- For exports, under exceptional circumstances.
2. Section 92A- In case of national emergency, extreme urgency of public non-commercial use by notification of the Central Government
3. Section 92 A (1) – To a country which has insufficient or no manufacturing power in the pharmaceutical sector to address public health.

Global Perspective on Compulsory Licensing- This phenomenon of compulsory licensing is a hugely debated issue. Many developing countries are giving importance to the compulsory licensing because of the unavailability and unaffordability of the medicines, and they are continuously granting more and more compulsory licenses. The developed countries of Europe, USA are opposing this view as it would make innovation difficult for the pharmaceutical companies

India’s first case of granting compulsory license– India’s first case of granting compulsory license was granted by the Patent office in 2012 to an Indian Company called Natco Pharma for the generic production of Bayer Corporation’s Nexavar. All the 3 conditions of Sec 84 was fulfilled that the reasonable requirements of the public were not fulfilled, and that it was not available at an affordable price and that the patented invention was not worked around in India.

This medicine is used for treating Liver and Kidney Cancer, and one month’s worth of dosage costs around Rs 2.8 Lakh. Natco Pharma offered to sell it around for Rd 9000 making this potentially lifesaving drug easily accessible to all parts of the society and not just the rich people. The Government took this decision for the general public benefit. However, it was heavily criticized by the Pharmaceutical Companies as they felt the license should not have been given.

However, Natco Pharma is paying the royalties to Bayer at a rate of 6% of all sales on a quarterly basis in accordance with the guidelines set by the United Nations Development Programme (UNDP).

In January 2013, the Health Ministry of India recommended three anti-cancer drugs trastuzumab, ixabepilone, and dasatinib for compulsory licenses. This will allow the Government to sell these drugs at a significantly lower price and will also allow the people who cannot afford the drugs originally, access to these drugs.

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Impacts of Compulsory Licesnsing

The areas which will be impacted by compulsory license are as follows:-

1. Innovation – In Underdeveloped countries, the innovation of pharmaceutical companies will be less as they will be dependent on generic drugs. They will prefer getting the compulsory license to a generic drug rather than funding the Research & Development separately, which is often a very costly thing. Moreover, research-based pharmaceutical companies will not launch patent module in the developing countries as there is always the risk of losing the patent, and losing money in research.
2. Competition & Cost- Compulsory licensing will increase the number of companies producing generic medicines. Hence the supply will go up, and the cost will come down. This will also force the innovator countries to introduce differential pricing of their patent module so that they can stand on the market.
3. Patients- Patients will get medicines at a significantly cheaper rate. Also, the big pharmaceutical companies often introduce plans like free access to medicine to protect their patents in the developing countries.

Conclusion

The patient versus patent issue is one of the most important problems now in the modern healthcare system. Although India has only passed one compulsory license yet, the number of compulsory licenses granted worldwide is on the rise. The underdeveloped and developing countries want to pass compulsory licenses, and the developed, and the big pharmaceutical companies do not want the compulsory licenses to be passed. The main reason the big pharmaceutical companies do not want compulsory licenses to be passed is that it takes a lot of money and effort to create the drugs, and even then there is no certainty. They have to recoup the costs of the innovation. Hence the companies have to fix the cost of their patented module according to the economic status of the country if they want to protect their product from compulsory licensing.

India, in particular, faces a challenge, owing to the economic condition of the majority population. On one hand, it has to comply strictly with the international standards of patent protection and on the other hand, it has to safeguard public health.

We can say that compulsory licensing has now become the hope for financially challenged patients in underdeveloped countries, and compulsory licensing is now one of the most controversial topics in International Property matters.

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Reference:

1. Current Scenario of Patent Act published by Indian Journal of Pharmaceutical Education and Research