Compulsory Licensing under Patent Law

Can you use somebody else's patent without the authorization of the patent owner? This is when compulsory license comes into role. Common examples of compulsory licenses are cable providers, music companies, satellite television providers etc. However, it is a subject that is fiercely contested. Due to the scarcity and high cost of medications, many developing nations place a high value on compulsory licensing and are granting an increasing number of these licenses each year. The industrialized nations of Europe and the United States disagree with this viewpoint since it would make it harder for pharmaceutical corporations to innovate. This article contains information about compulsory licensing, its provisions under patent law, some international provisions, case laws regarding the same, and its importance at the time of COVID-19.

What is Compulsory licensing?

In India, patents are issued to promote inventions and ensure they are viable for commercial use. A Patentee should not be able to enjoy a monopoly for the importation of the patented item, according to the Indian Patent Act. The Patent Act includes provisions, such as compulsory licensing, to ensure that patents do not undermine public health and nutrition preservation and that the Patentee does not exploit the Patent Rights.

The CL, thus, serves to create a balance between two diametrically opposed goals: compensating patentees for their ideas and making patented goods, particularly pharmaceutical goods, more widely and affordably available to a large population in emerging and impoverished nations.

The following aspects are taken into account while granting Compulsory License:

1. Nature of the invention

2. Time that has elapsed since the grant of the patent

3. The measures which are already taken by Patentees or any licensee to fully utilize the invention

4. The applicant's capacity to use the invention for the benefit of the public

5. The applicant's ability to take on the risk of investing money and developing the idea if their application is approved.

Sections 84 and 92A of the Indian Patent Act

According to Section 84, anybody may submit a request to the Controller for the issue of a compulsory license upon the expiration of three years, regardless of whether they are the holder of the license for that Patent. This is true even if none of the following conditions is met:

• The public's reasonable expectations about the patented invention have not been met, 

• the patented invention is not offered to the public for a price that is reasonable and affordable, and 

• the patented invention is not being used on Indian soil.

Additionally, pursuant to a notification from the Central Government, the Controller may issue obligatory licenses "suo motu" under section 92 in situations of "public non-commercial use," "national emergency," or "severe urgency."

The ultimate decision to award the obligatory license rests with the Controller, who also considers other considerations such as the nature of the invention, the applicant's ability to use the product for the benefit of the public, and the reasonability. Even when a third party receives a compulsory license to use a patent, the patent holder retains ownership of the property and is still entitled to compensation for copies of the products produced under the compulsory license.

International law for compulsory licensing

Article 31 (f) of the TRIPS agreement

The requirement for medicines to be available to nations with limited or no manufacturing capability through importation from other nations was weakened by Article 31(f) of the TRIPS Agreement. On August 30, 2003, the WTO adopted a method to address this issue by bringing paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health into effect.

As long as the qualified importing members have notified the TRIPS councils, the obligation under Art. 31(f) of the TRIPS agreement is thus waived in the case of exporting pharmaceutical items to nations with little to no manufacturing capability.

India's first compulsory license of patent 

Natco Pharma v. Bayer Corp.

The subsequent instance demonstrates the licence application for Nexaver®, a drug used to treat advanced liver and kidney cancer.

Nexaver® (Sorafenib Tosylate), a life-saving drug used to treat liver and kidney cancer, was developed by Bayer Corp. and received India's first-ever compulsory licence in 2012 from the Indian Patent Office. One month of treatment with this medication from Bayer costs around Rs. 2.8 lakh (3,737.89 USD, at Rs. 74.84 to a USD). With Rs. 74.84 to a USD, Natco Pharma offered to sell the medication for Rs. 9000 (or 120.15 USD), making it affordable for the general public. As a result, Section 84 of the Indian Patent Act's three requirements were all met.

Other Case Laws

1. Koninklijke Philips Electronics N.V. vs. Rajesh Bansal and Ors. (2018)

Recently, the Indian courts have determined that the prohibition on anti-competitive behavior in the Competition Act and the provision requiring compulsory licensing in the Patent Act should not be read alone but rather together. The Controller could also decide whether a patentee had engaged in anti-competitive behavior. However, if CCI has finally determined that a patentee's actions were anti-competitive and that finding has become final, the Controller would also proceed on the said basis and—on a theory similar to issue estoppel—the patentee would be barred from asserting the opposite.

2. BDR Pharmaceuticals v. Bristol-Myers Squibb (2013) 

The example below depicts a license request for the cancer treatment drug Sprycel®.

The Controller denied BDR Pharmaceuticals' (BDR) request for a compulsory license for the cancer medicine Sprycel® on March 4, 2013. The controller claimed that BDR had not presented a compelling argument to support the issuance of a mandatory license. Specifically, the Controller found that BDR had made no credible attempt to procure a license from the patent holder and the applicant had not acquired the ability to work the invention to public advantage. Thus, the compulsory license was denied.

COVID-19 Pandemic

This will probably happen due to the Delhi High Court's decision in Rakesh Malhotra v. Govt. of National Capital Territory of India and Others on April 20. The government was instructed to intervene and use its right to compel licensing under the Patent Act by the two-judge panel of Justice Vipin Sanghi and Justice Rekha Palli.

Under the compulsory licensing provision of Section 92 of the Patent Act, when a national emergency arises, the government may grant a license to another pharmaceutical company to produce the drug and pay a royalty to the original patent holder.

The justices instructed the government to "urge" producers, patent owners, and licensees to raise the manufacturing of drugs needed to treat COVID-19 right now. The 11-page court order listed many medications frequently used to treat the coronavirus and reportedly in short supply, including Tocilizumab, Favipiravir, Ivermectin, Dexamethasone, Methylprednisolone, Dalteparin, Enoxaparin, HCQ, and Baricitinib.

To manufacture Remdesivir, Gilead Sciences took the initiative in 2020 and voluntarily entered into agreements with Indian pharmaceutical firms.

This proactive approach protected the global pharmaceutical corporation from introducing compulsory licensing, particularly when state governments like Uttar Pradesh gave Remdesivir to covid patients without charge to fight the deadly infection.

The high court advised the government to give the corporations fair compensation in royalties because it recognized that patent holders make significant investments in R&D and that the threat of compulsory licensing could have unfavourable effects.

In March 2012, the government used its authority granted by the Patent Act for the first time. Compulsory licensing allowed NATCO Pharma, a domestic company, to produce and market the generic version of Sorafenib Tosylate, a patented and legally protected anti-cancer medication from Bayer.

Conclusion 

Since compulsory licensing is an exception and a flexible rule to the general rule of patents, it must be utilized carefully. The provision lies in the middle; neither full patent protection is granted nor is it completely refused. It has an immediate impact on innovation financing, and its unrestricted usage may make multinational pharmaceutical companies reluctant to propose novel medications in other nations. Therefore, if businesses want to prevent their product from being subject to compulsory licensing, they must set the price of their patented module by the nation's economic situation.

Thanks to compulsory licensing, patients in developing nations who are struggling financially now have hope. Due to the economic situation of the vast majority of the population, India needs this supply. The difficulty, though, is that it must both protect public health and adhere to international rules for patent protection.