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Compulsory License under The Indian Patents Act

  • Compulsory licences are permissions granted by the Controller General to a third party to manufacture, use, or sell a patented product or process without the approval of the patent owner. This idea is recognised at both the national and international levels, with the Indian Patent Act, 1970 and the TRIPS Agreement specifically mentioning it. If a compulsory licence is to be granted in someone's favour, several pre-requisite conditions must be met, as outlined in sections 84-92.
     
  • Any person, regardless of whether or not he already has a licence under the patent, may submit an application.
     
  • According to Section 84, any person, regardless of whether he is the holder of the patent's licence, can apply to the Controller for a compulsory licence after three years if any of the following conditions are satisfied:
    • the reasonable requirements of the public with respect to the patented invention have not been satisfied
    • the patented invention is not available to the public at a reasonably affordable price
    • the patented invention is not worked in the territory of India.

Requirements of applications for compulsory licences
Every application must include a statement describing the nature of the applicant's interest, as well as any other information that may be required, such as the facts on which the application is based. If the controller is satisfied, he has the authority to order the patentee to grant a licence on the terms he sees proper.

Purpose for granting compulsory licences (Section 89)
The controller must use his powers to grant a compulsory licence to ensure the following general objectives:
  1. patented inventions are worked on a commercial scale in India's territory without undue delay and to the fullest extent reasonably possible; and
  2. the interests of anyone currently working on or developing an invention in India under the protection of a patent are not unfairly prejudiced.

Factors to be taken into account while granting compulsory licences
The controller must consider the following elements when making a decision on an application for a compulsory licence:
  • the nature of the patent, the amount of time since the patent was granted, and any steps taken by the patentee or any licensee to fully exploit the patent
  • the applicant's ability to use the invention for the benefit of the public
  • Whether the applicant has attempted and failed to secure a licence from the patentee on acceptable terms and conditions within a reasonable time frame.
  • the applicant's willingness to take on the risk of supplying funds and putting the patent into production

Compulsory licences on notifications by Central Government (Section 92)
If the Central Government determines that compulsory licences must be granted at any time after the patent is sealed to work the invention in the event of a national emergency, severe urgency, or public non-commercial usage, it may make a declaration in the Official Gazette to that effect.

Compulsory licences for export of patented pharmaceutical products in certain exceptional circumstances (Section 92A)
  • For the manufacture and export of patented pharmaceutical products to any country with insufficient or no manufacturing capacity in the pharmaceutical sector for the relevant product to address public health problems, a compulsory licence would be available. However, such countries has issued a compulsory licence or has allowed the importation of patented medicinal products from India through notification or other means.
     
  • The Controller shall grant a compulsory licence solely for the manufacture and export of the concerned pharmaceutical product to such nation upon receipt of an application in the prescribed way.

Compulsory licence to operate as deeds between parties concerned (Section 93)
  • Any order for the award of a compulsory licence will have the same effect as a deed granting a licence signed by the patentee and all other necessary parties and containing the terms and conditions stipulated by the Controller.

Guidelines in determining whether use is Adequate
  • It is up to the controller to decide if the extent to which the article or process is created or carried out is adequate in each instance, and if not, whether the explanations given are sufficient.
  • A patentee who has enabled a portion of the demand in this country to be met by importing goods from other countries cannot demonstrate that the manufacture of the patented article or use of the patented technique in this country is adequate.
  • If the patent is being adequately worked in this country, the fact that certain specialised uses of the invention are not being met by manufacture here is not necessarily a reason for issuing a compulsory licence under this heading.

Where patentee holds more than two patents
If the Controller is satisfied that the applicant cannot work the licence granted to him under those patents efficiently or satisfactorily without infringing the patentee's other patents, and if those patents involve significant technical advancement or economic significance in relation to the other patents, he may, by order, direct the grant of a licence in respect of the other patents as well, allowing the licensee to work the patent or patents in question.

Procedure for grant of compulsory licence in case of national emergency
The Controller is satisfied on review of an application for the grant of a compulsory licence pursuant to a government notification that it is essential in:
  1. a situation of national emergency; or
  2. a situation of extreme urgency; or
  3. a case of public non-commercial use.
Power of Controller to adjourn applications for compulsory licences (Section 86)
When an application is filed on the grounds that the patented invention has not been worked in India or that the reasonable requirements of the public have not been met, and the Controller is satisfied that the time since the patent's sealing has been insufficient for any reason to enable the invention to be worked on a commercial scale to an adequate extent or to the fullest extent possible. He may postpone the subsequent hearing of the application for a period of not more than twelve months in total if he believes it is necessary for the invention to be worked.

Powers of Controller in granting compulsory licences (Section 88)
If the Controller is satisfied on receipt of an application that conditions imposed by the patentee on the grant of licences under the patent, or on the purchase, hire, or use of the patented article or process, are prejudicing the manufacture, use, or sale of materials not protected by the patent, he may, subject to the provisions of the Patents Act 1970, order the grant of licences under the patent to such customers of the applicant as he thinks fit, as well as to the applicant.

Right of licensee under compulsory licences to institute infringement actions
Any individual who has been granted a compulsory licence has the right to insist the patentee take action to prevent any infringement of the patent. If the patentee refuses or fails to do so within two months of being asked, the licensee may bring infringement actions in his own name, as if he were the patentee, making the patentee a defendant. Only if a patentee is included as a defendant and enters an appearance and participates in the proceedings will he be liable for costs.

Terms and conditions of compulsory licences (Section 90)
Once the controller has decided to give the obligatory licence, the terms and conditions of the compulsory licence will be established. The controller also determines the amount of royalties or payment due to the patentee based on the following factors:
  • The investment of the patentee in the invention
  • the applicant's capacity to use the patentee's invention;
  • the market price of the patented items (at reasonable prices); and the licence's term.
If it is in the public interest, the government may require the controller to authorise any licensee in respect of a patent to import the patented item or a product or substance made by a patented process from another country at any time.
  • The licensee may apply to the Controller for a revision of the terms and conditions of a compulsory licence at any time after he has worked the invention on a commercial scale for a minimum of twelve months on the grounds that the said terms and conditions have proven to be more burdensome than originally expected and that as a result the licensee is only able to work the invention at a loss. This type of request will only be considered once.

Revocation of patents for non-working (Section 85)
  • Where a compulsory licence has been granted in respect of a patent, the Central Government or any person interested may apply to the Controller for an order revoking the patent after two years from the date of the order granting the first compulsory licence on the grounds that the reasonable requirements of the community with respect to the patented product have not been satisfied or that the patented invention is not worked in the territory of India or is not available at affordable price.
  • The applicant bears the burden of proving that the patented product is not being used to its fullest extent possible.

Termination of compulsory licences (Section 94 & Rule 102) (Form 21
  • On the patentee's application or any other person deriving title or interest in the patent, the Controller may terminate a compulsory licence issued if and when the circumstances that led to its issuance no longer exist and are unlikely to recur
  • The compulsory license holder may appeal against such termination
  • A patentee's right to exclusive use of a patent for the duration of its protection is a property right. An application for a compulsory licence is a process that impacts that right to property, and as a result, an appeal from the Controller's decision granting the licence would be a civil proceeding.

Case Laws on Compulsory Licencing
  1. Bayer Corporation Vs. Union of India and Others (Bayer v. Natco)[2]
    Decision Date: 04.03.2013

    Facts of the Case:
    • Bayer Corporation, Germany, patented "Sorafenib," an active pharmaceutical ingredient used to treat liver and kidney cancer in India (Patent No. IN 215758). Nexavar is the brand name for sorefenib, which is sold all over the world.
    • In 2008, the Indian generic company CIPLA began producing and marketing Sorafenib tablets with the brand name 'Soranib' and the description 'Sorafenib Tablets 200mg.' Bayer launched an infringement lawsuit against CIPLA in an Indian court ( CIPLA is not a Subject matter of the present case)
    • Bayer charged 280,438 INR (US $ 5280) a month at the time of the suit, while CIPLA's generic version cost 27,960 INR (US $ 525) for the same number of tablets.
    • Another generic producer, Natco Pharma Limited, submitted a request for compulsory licencing against Bayer's patent on Sorafenib before the Controller of Patents during the continuing dispute between CIPLA and Bayer. Section 84 (1) of the Indian Patent Act of 1970, as revised in 2005, was used to request the compulsory licence.
    Decision of the Controller:
    • Because Bayer had failed to meet the conditions of S. 84 of the Patents Act, 1970, the Controller determined that Natco Pharma deserved a forced licence. The compulsory license's terms and conditions were drafted by the Controller, who also handed Bayer a 6% royalty on profits.
    • Bayer filed an appeal with the Indian Intellectual Property Appellate Board (IPAB) against the Controller's ruling.
    IPAB Decision:
    • Bayer filed an appeal against the Controller's decision, claiming that the Compulsory License was unnecessary because the medicine was already available at a cheaper price (based on CIPLA's sale of Rs. 5400/- per month) than the price set by the Controller.
    • As a result, Bayer contended that if the drug is available on the market at reasonable pricing and is not required by the patentee, section 84 (1) (b) of the Patents Act will not apply.
    • The IPAB, on the other hand, dismissed this claim, stating that Bayer was not the one selling the drug at a reasonable price, especially because Bayer had a lawsuit ongoing against CIPLA for the same drug.
    • In order to avoid the compulsory licence, only the patentee must avoid the grounds that are mentioned under section 84 (1) (b).
    High Court Decision
    • The main legal issue before the High Court was whether supplies by patented drug infringers (in this case, Cipla) had to be taken into consideration in determining whether the reasonable requirement test was met?
    • As a legal matter, the Court determined that the patent holder, either alone or through its licensees, has the responsibility to meet the reasonable requirements of the public.

    Supreme Court decision:
    • The Supreme Court stated in dismissing Bayer's Special Leave Petition that "In the facts of the present case, we are not inclined to interfere. The Special Leave Petition is dismissed, keeping all questions of law open."
    • As a result, the Supreme Court's ruling restores the uncertainty that had previously been associated with the grant of a Compulsory License in India.

     
  2. Monsanto Holdings Pvt. Ltd. and Ors. vs. Competition Commission of India and Ors[3]
    Facts of the Case:
    • The technology for generating genetically modified cotton seeds is patented by Monsanto Holdings Pvt. Ltd., Monsanto Company, and Mahyco Monsanto Biotech (India) Pvt. Ltd. ("Monsanto"). Monsanto licenced this technology to a number of seed producers, including Nuziveedu Seeds Ltd., Prabhat Agri Biotech Ltd., and Pravardhan Seeds Pvt. Ltd. ("seed producers"). A non-refundable charge and a recurring fee ('trait value') were paid by the seed manufacturers to Monsanto in exchange for this sub-licensing. Monsanto's royalty fee/ trait fee charged to seed manufacturers has been a source of contention between them.
    • Cases were filed before the CCI against Monsanto in response to the royalty fee/ trait fee charged by the company, based on a "reference" filed by the Department of Agriculture, Cooperation and Farmers Welfare, Ministry of Agriculture and Farmers Welfare, Government of India, and "information" filed by seed manufacturers. In their case, the seed companies claimed that Sections 3 (anti-competitive agreements) and 4 (abuse of dominance) of the Competition Act had been violated.
    • Monsanto had a strong position in the relevant market, according to the CCI, India's competition regulator. The CCI also found that Monsanto's actions appeared to be in violation of section 4 of the Competition Act, and that the sub-licence agreements' terms were severe and unreasonable for preserving patent rights. As a result, the CCI launched an investigation into the situation.
    • The order for the probe was challenged in the Delhi High Court by Monsanto, who claimed that the CCI lacked power to investigate problems relating to the exercise of patent rights.
    Issues Raised:
    • Jurisdiction of Competition Commission of India
      • Monsanto stated that any alleged infringement of patent rights would be dealt with solely through the Patents Act, and that CCI had no jurisdiction over such matters.
      • The Court held that the focus of the Patents Act and the Competition Act are different, citing the case of Telefonaktiebolaget L.M. Ericsson vs. Competition Commission of India & Others decided on 30 March 2016, Delhi High Court went on to say that the two statutes don't have any irreconcilable differences.
      • A single judge bench of the Delhi High Court had reviewed numerous parts of the Competition Act as well as the Patents Act in Ericsson case, and found that the Competition Act was enacted in addition to, not in instead of, other legislation. As a result, the Court found that the CCI's jurisdiction to hear complaints against patent-related abuse of dominance could not be ruled out.
         
    • The Competition Act may apply to patent licencing agreements in certain circumstances
      • Monsanto asserted that a patentee might insert any condition/obligation in an agreement for limiting patent infringement, and that the Competition Act did not apply to the assessment of such an agreement or provision in an agreement for reasonableness or unreasonableness.
      • According to the Court, the Competition Act recognises a person's right to prevent patent infringement, and any arrangement entered into for that reason would be beyond the purview of the Competition Act. However, the Court noted that such rights are not absolute. It stated that only agreements necessary for protecting patent rights are exempted from the Competition Act, and only to the degree that they are necessary. The patent holder is likewise permitted to impose reasonable requirements in such agreements, according to the Court. Agreements that incorporate unreasonable terms that considerably beyond those that are required, on the other hand, would be subject to the Competition Act's rigours.
      • The Court went on to say that the CCI has to decide whether an agreement was based on reasonable terms.
         
    • Abuse of Dominance Complaints' Forum
       
    • Monsanto argued that, in light of the Supreme Court's decision in Competition Commission of India v. Bharti Airtel Ltd. and Ors. (Civil Appeal No. 11843/2018, decided on 05 December 2018, Supreme Court of India), the question of whether patent rights have been abused must be decided by the Controller of the Patent Office prior to any CCI investigation.
       
    • The Supreme Court concluded in Bharti Airtel that the CCI could only exercise its authority after the regulator, in that case the Telecom Regulatory Authority of India (TRAI), had returned its findings on the complaint. The Supreme Court further said that before the CCI could begin a probe, TRAI had to look into the technical difficulties raised in the complaint.
       
    • The Delhi High Court ruled that Bharti Airtel was inapplicable because the position of TRAI as a regulator differed fundamentally from that of the Controller of the Patent Office. The Court further noted that TRAI's powers encompassed telecom sector regulation, whereas the Controller of Patents did not regulate the use of patent rights in the same way as TRAI did because patents were not an industry. Thus, the nature of TRAI's and the Controller of Patents' regulatory functions could be plainly separated.
    Conclusion:
    The Court dismissed the petition, stating that the CCI's order for an investigation was an administrative order, and that no interference was required unless it was found to be arbitrary, unreasonable, and failing the Wednesbury Test (the decision was so irrational that no reasonable authority would consider imposing it).
     
  3. BDR Pharmaceuticals Pvt. Ltd. Vs Bristol Myers Squibb[4]
    • In the matter at hand, BDR wrote to Bristol Myers Squibb (hereinafter referred as BMS) on February 2, 2012, requesting a voluntary licence to manufacture DASATINIB in India
    • In response to BDR's letter on 13/03/2012, BMS asked for facts demonstrating an ability to consistently supply high volume of the API, DASATINIB, to the market, facts demonstrating your litigation history or any other factors that may jeopardise Bristol Myers Squibb's market position," "quality related facts, in particular compliance with local regulatory standards and basic GMP requirements," and "quality assurance systems."
    • BDR interpreted Bristol Myers Squibb's response as "obviously indicative of the denial of the application for voluntary licence" and did not pursue the case further, making no additional efforts to reach a settlement, instead filing a compulsory licence application on March 4, 2013.
    Response of Controller
    • Following the Controller's review of the BDR's CL application, a notice was issued stating that a prima facie case could not be made out for the making of an order under Section 84 of the Act because "the applicant has not acquired the ability to work the invention to the public advantage" in the absence of DCGI approval, and the applicant has also not made reasonable efforts to obtain a licence from the patentee on reasonable terms and conditions.
    • A request for hearing was filed by the BDR with the Patent Office on 13/05/2013.
    Argument of BDR
    • BDR argued at the Controller's hearings that by failing to respond directly to the request for voluntary licence, the patentee may have continued to contact, requesting more and more information, thus putting the request for voluntary licence on hold.
    • BDR also argued that if the patentee avoids specifically rejecting the request for voluntary licence or does not address the terms for grant hereunder, the application for compulsory licence could be delayed indefinitely due to the patentee's lack of specific denial, unless the Controller exercises his powers in appreciating the applicant's efforts toward meeting the requirements of Section 84(6) (iv).
    • The controller responded that the patentee cannot hold the applicant for more than Six Months from making the request for compulsory licence.
    • BDR also claimed that, much to the applicant's surprise, the patentee's attorney publicly declared in the April 2012 issue of the 'Indian Business Law Journal' that the patentee's strategy was to 'keep the potential licensee of a compulsory licence engaged without a clear outright rejection' and continue with new queries. This led applicant to the conclusion that request for compulsory licence is the only way left.
    • The phrase 'efforts' does not include the qualifier 'reasonable', according to the Controller, and the applicant should have understood that the responsibility imposed on him to undertake 'efforts' is unconditional, inflexible, and without exceptions.
    • The Controller, on the other hand, stated that the stage for making a merits-based decision on the applicability of Section 84 grounds has not yet arrived.
    Decision of the Controller
    • As a result, the controller determined that there is no prima facie case for issuing a CL under Section 87 and rejected the CL application.
       
  4. In Re: Distribution of Essential vs Unknown on 30 April, 2021[5]
    • Following the Covid-19 outbreak, the Supreme Court (the "Court") took notice of India's unparalleled humanitarian situation.
    • The Court pointed out that the jurisdiction it assumed under Article 32 did not always imply that a High Court's jurisdiction under Article 226 was eroded.
    • However, this Court has taken on jurisdiction over issues relating to Covid-19 that cross over state borders and affect the entire country.
    • The Supreme Court of India said, in this case, about the Potentiality of Compulsory Licensing for Vaccines and Essential Drugs:
      • Several medications used in the Covid therapy protocol, including Remdesivir, Tociluzumab, and Favipiravir, are patented in India.
      • In the event of a national emergency or extreme urgency, Section 92 of the Patent Act allows for the issuance of a compulsory licence.
      • The Central Government can approve some corporations to use any patents for "government purposes" under section 100 of the Patents Act.
      • While discussing royalties with patentees, Indian companies can begin manufacturing the medications.
      • If the Central Government or its authorised company is unable to establish a deal with the patentee, the High Court must determine the patentee's fair royalty.
      • Another option is for the government to negotiate for the patents from the patentees under Section 102.
      • In addition, the Central Government has the authority to revoke a patent in the public interest under section 66 of the Patents Act.
      • The Trade Related Aspects of Intellectual Property Agreement ("TRIPS") mentions the use of these flexibilities. It establishes a permissive environment for the creation of exceptions and constraints that advance public health goals. A combined reading of Articles 7,8, 30, and 31 is evident of this.
      • The Doha Declaration's paragraphs 5(b) and (c) deal with the idea of compulsory licencing and the reasons on which licences are awarded.
      • Several countries, like Canada and Germany, have eased the rules governing the issuance of compulsory licences.
         
  5. Garware Wall Ropes Ltd. Vs. A.I. Chopra and Konkan Railway Corp[6]
    Facts of the Case
    • This case was between Pune based Garware Wall Ropes (Plaintiff/Appellant) and A.I Chopra Engineers & Contractors (AICEC), Konkan Railway Corporation (Co-owner of a patent) and defendant/respondent).
    • IN196204 ("Steel Wire Rope Net System") and IN201177 ("Spiral Lock System") are the patents at issue in this dispute; the first is jointly owned by Garware and the Konkan Railway Corp. (KRC).
    • Whereas '204 is generally used in mountainous terrains to guard against boulder rockfall, mudslides, and avalanches, '177 is used to connect two adjacent panels of boulder nets, preventing boulders from falling through the junction of two nets.
    • Garware claimed that the first respondent AICEC infringed on the patents by selling/using identical/substantially similar items to secure government contracts, including in a KRC tender soliciting bids from producers of such products. Garware requested for the ad interim injunction.
    • The major defence of the defendants in this case is section 100 of the Patents Act. Because the contract with the Railways was signed in the name of the President of India, AICEC argued that its use of the patented inventions fell under the provisions of government usage stated in ss.99 and 100 of the Act, giving it immunity from infringement.
    • Following the denial of his motion for an interim injunction, Garware filed an appeal with the Bombay High Court's Nagpur Bench.
    Issue Raised:
    1. Novelty and patentability of the subject-matter of the patents
    2. The scope and admissibility of a defence under section 100 of the Act
    Decision of Court:
    • The President is included in the description of the Central government in section 3(8)(b) of the General Clauses Act, but the interpretation of section 100(4) of the Patents Act suggests that the authorization must be given by the government specifically for the use of the particular patent
    • The Court then considered the information presented by the defendants to prove a lack of novelty in the patent's subject matter.
    • The Court was clear that not only was this evidence being presented anew at the appellate level, but that the defendants had simply downloaded materials off the internet without evaluating the patent's specification or the invention it sought to protect.
    • When the defendants claimed that the "invention" was merely an improvement that did not qualify as an invention under the revised Act, the Court quickly pointed out that the patent application had been filed before the amendment.
       
  6. Lee Pharma v. AstraZeneca
    Facts of the Case
    • In this case, Lee Pharma, an Indian pharmaceutical company, filed compulsory licence for the production and sale of pharmaceuticals at the patent office in Mumbai on June 29, 2015. The licencing request was made in relation to a patented medicine known as 'Saxagliptin,' which is covered under AstraZeneca's patent number 206543. Type II Diabetes Mellitus was treated with the drug 'Saxagliptin.'
    • Lee Pharma requested a licence for the medicine from AstraZeneca in the year 2014. However, AstraZeneca refused and explained reasons. AstraZeneca sent this by email, but Lee Pharma was unsatisfied and did not consider it as a response, so he sent other communications such as reminders before heading straight to the patent office to obtain the compulsory licence.
    Decision of the Court
    While refusing Lee Pharma's application under Section 84(1), CGPTM reviewed each of the three grounds submitted and made the following observations:
    • Reasonable requirements of the public had not been satisfied: This ground was denied because Lee Pharma failed to show what the reasonable requirement of the public was for Saxagliptin, as well as the comparative requirement of Saxagliptin versus other DPP-4 inhibitors.
    • The patented invention was not available to the public at a reasonably affordable price: On the basis of a price comparison of the numerous Gliptins available in the Indian market, this ground was rejected. The CGPTM claimed that all DPP-4 inhibitors were priced similar.
    • The patented invention had not been worked in the territory of India: This ground was denied since manufacturing the drug in India is not a requirement for establishing working in India, and because Lee Pharma had not demonstrated the particular requirement in India, it was difficult to determine whether manufacturing in India was required.
End-Notes:
  1. Halsbury Laws of India, The Patents Act, 1970, WIPO Website, Manupatra, SCC online
  2. 2014 (60) PTC 277 (Bom)
  3. 2020 SCC OnLine Del 598.
  4. Controller of Patents, Patents Office, Mumbai (BEFORE CHAITANYA PRASAD, CONTROLLER) C.L.A. No. 1 of 2013 Decided on October 29, 2013
  5. Suo Motu Writ Petition (Civil) No.3 of 2021
  6. 2009 (111) Bom LR 479

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