This article is written by Divya Sampath who is pursuing a Certificate Course in Intellectual Property Law and Prosecution from LawSikho.

Introduction

Patent rights are proprietary rights granted to the owner to prohibit third parties from using, selling or offering for sale and making a product or process (reverse engineering) without the owner’s permission within the jurisdiction of the country or area in which the patent is in force. The proprietor is therefore entitled to issue and licence certain patents to third parties; licences issued by the proprietors of the patent are considered to be voluntary. In such conditions, the competent national authority shall issue a so-called “compulsory” or “non-voluntary” licence to a third party to permit the use of the patented invention during the term of the patent without the authorization of the patentee. 

Such circumstances are defined in 5A(2) of the Paris Agreement, 1883 which reads that: 

“Each country shall have the right to take legislative measures providing for the grant of compulsory license to prevent the abuse which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.”

According to the agreement, compulsory licences are either issued by the government to a third party for the use or selling of a specific product or for the use of a particular method that has been patented without the patent proprietor’s permission, and it is up to the contracting state to establish certain legislative steps.

We will now look at the international and national jurisdictions to understand the framework of compulsory licensing to critically analyse the solutions it offers to patent law issues. 

International Law and Compulsory Licensing

This section of the article charts the development of international patent law with respect to compulsory license or “non-voluntary” license and how this helped create an exception in traditional patent law. We begin by discussing the TRIPS Agreement that specifies that efforts to acquire a licence under fair commercial terms must have been exhausted for a reasonable period of time in order for a compulsory licence to be given. Each country decides the manner or the reason why they grant a compulsory license is to be made, such as in the EU, if the following need to be established in part or in whole for a compulsory license to be granted i.e. dependence between patents or between patents and plant variety rights, the need to put an end to activities that infringe national competition law, the public interest, the inability to work or manufacture of pharmaceutical goods for sale to countries, in compliance with EU Regulation 816/2006 on the compulsory licencing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems.

In the US, under the so-called ‘march-in rights’, federal governments allow patented inventions to be used subject to payment of fair compensation to the patent owner, which are equal or equivalent to a compulsory licence but are not exactly considered the same. 

TRIPS also specify that, in such circumstances, in particular in cases of national emergency or extreme urgency or in cases of public non-commercial use, the conditions for a compulsory licence can be waived. Article 31.f of the TRIPS requires compulsory licences to be used ‘primarily’ for local markets, a requirement which complicates countries’ ability to import drugs manufactured overseas.

This brings the “Doha Comment” into the frame. On 17 May, 2006, the official journal of the European Commission published Regulation 816/2006, which adopted the Doha Declaration, allowing compulsory licences to be given for the manufacture of patented drugs in developing countries, provided that they are exported to some countries, principally, those on the UN’s list of least-developed countries with low per capita income. The Doha Declaration also provided that, under the TRIPS Agreement, any country which is a member of the WTO has the right to issue a compulsory licence where there is a need for public health.

Article 31bis of the TRIPS Agreement, adopted in the 2001 Doha Declaration and Paragraph 6 of the Declaration, provides that a country may grant a compulsory patent licence for the export of medicinal products to another country, given that the medicinal product is not covered, but that there is also no production capacity. Thus, the international framework for compulsory licenses makes it possible for countries to have access to life-saving drugs at a low price which makes it a huge benefit for least developing countries. 

Compulsory Licensing in India

India has challenges owing to its economic condition and faces a dilemma with respect to strictly meeting the international standards of patent protection on one hand, and safeguarding public health on the other. The Indian Patent Act 1970, in its Section 84 mentions that the following three criteria have to be fulfilled in order for compulsory license to be granted: 

1. That the reasonable requirements of the public with respect to the patented invention have not been satisfied; or
2. That the patented invention is not available to the public at a reasonably affordable price; or
3. That the patented invention is not worked in the territory of India.

Apart from the above, compulsory licenses may also be granted: 

(a) For exports, under exceptional circumstances (Section 92A).

(b) In case of a national emergency, extreme urgency of public non-commercial use by notification of the Central Government (Section 92A).

(c) To a country which has insufficient or no manufacturing power in the pharmaceutical sector to address public health (Section 92 A (1)).

Thus in India, during a public health emergency or when there is insufficient manufacturing of pharmaceuticals a compulsory license can be given. Furthermore, the patent act also allows for export of such pharmaceuticals in exceptional circumstances. 

Compulsory Licensing as a solution to Patent Law Issues

With compulsory licensing, has come the increase in the number of companies producing generic medicines. This has led to the supply going up making the cost of the same come down. This has also encouraged companies to fix the cost of their patented module depending on and in accordance to the economic status of the country as an incentive against compulsory licensing, though counter-intuitive in this context, it still yet satisfies the purpose of access to pharmaceuticals and drugs to all and thus is beneficial in the longer run. 

Compulsory licencing has also allowed patients to buy drugs at a substantially lower cost, making compulsory licencing the hope of underdeveloped countries for financially challenged patients. Another advantage provided by compulsory licences is that developing countries which import active ingredients or medicinal products from a country where such products are protected by a patent and where such imports do not have to be approved by the owner. By importing active ingredients under a compulsory license it becomes easy for developed countries to manufacture drug with already patented materials in other jurisdiction with minimum payment of royalties.

A compulsory licence, as we know, may be issued in cases where the applicant has unsuccessfully attempted, under fair commercial terms and conditions, to obtain a contractual licence from the proprietor of the patent, except in cases of national emergency, non-commercial public usage, or to put an end to practises which infringe national or Community competition law. The latter is of prime importance to curd weapon technologies from transferring between countries and thus preventing war in the long run.  

Conclusion

Today, many nations have taken steps to adapt their regulations to the health crisis as a result of the COVID-19 pandemic. A group of legislators recently introduced a bill in Brazil to allow the government to suspend temporarily all patents relating to medical devices that could be used to battle COVID-19. In Ecuador, a resolution was released by the National Assembly to compel the national government to create compulsory licences and other steps to ensure free and affordable access to prescription products and medical technology as a result of the declaration of health emergencies. Recently, Canada has passed a bill expediting the compulsory licencing process for medical products, which will be added to the list of countries seeking access to pharmaceutical products and medical devices, including papers on medical devices.

Since many countries are taking such initiatives and compulsory licenses are still very relevant, the main problem faced by patent these days is the increased price associated with its exclusivity, there has been a fierce debate about drugs for serious illnesses such as HIV, AIDS and COVID-19. Such drugs are too expensive for developing countries and generally protected by patents. Thus compulsory licenses enables access to these medicines creating a balance of trading patent technologies in a fair manner for equitable distribution and access to medicines. On the downside, however, since compulsory licenses are granted, a lot of medicines may end up in the grey market and not much investment will be encouraged in LDCs for Research and Innovation. One has to weigh both consequences i.e. the positive and negative aspects of compulsory licensing.

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