Law

Intellectual Property
Patents- Compulsory Licensing/ Other Uses
without Authorisation

Development Team
Role Name Affiliation

Principal Investigator Professor (Dr.) Ranbir Singh Vice Chancellor, National

Law University, Delhi
Paper Coordinator Mr. Yogesh Pai Assistant Professor of
Law, National Law
University, Delhi
Content Writer (CW) Swaraj Paul Barooah Founder: KNOW-GAP
and Coordinator SPICY
IP
Content Reviewer (CR) Mr. Yogesh Pai Assistant Professor of
Law, National Law
University, Delhi
 Module Detail
Subject name Law

Paper name Intellectual Property

Module name/ Title Patents- Compulsory Licensing /other uses without

authorization
Module Id Law/IP/# 32

Pre- requisites Conceptual understanding of patents, public interest, access to

medicines, TRIPS Agreement,
Objectives To get a fundamental understanding about the legal framework
of compulsory licences and other uses without authorization of
the right holder in India
Key words Patents, compulsory licence, TRIPS, Article 31, access to
medicines, Doha Declaration, Bayer/ Natco case, abuse of
patents

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 Structure of Module

Topic
Sub Topic
Introduction

1. Compulsory licences and other 1.1 Compulsory Licensing & Governmental

unauthorized uses under TRIPS Use (Article 31)

2. Compulsory Licensing in India 2.1 Abuse of patents

2.2 Case law 1: BDR v. Bristol-Myers Squibb
2.3 Reasonable requirements of the public
2.4 Reasonably affordable price
2.5 Working of the patent within the territory of
India
2.6 Case law 2: The Natco – Bayer compulsory
licence issue
2.7 ‘Public Interest requirements’

3. ‘Compulsory licence for export of

Pharmaceutical Products’

4. ‘Compulsory licence of mailbox

application related patents

5. Government use, and other unauthorized 5.1 Government Use

uses in India 5.2 Experimental Use exception
5.3 Bolar Exemption

Summary

Self Check Exercises

Introduction

Patent regimes are configured so as to foster a delicate balance between private exclusionary
rights meant to incentivize innovation, and a countervailing public/social interest in accessing
the innovation at affordable rates. Achieving this balance requires nuanced exceptions and
limitations on the broad exclusionary right that is generally granted to the rights-holder. Part
of this configuration is the inclusion of ‘use without authoization’ licensing mechanisms
which allow the diffusion or dissemination of the innovation despite the rights-holders refusal
to voluntarily engage in such action. This is done in situations where the rights-holders

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refusal is deemed to be the equivalent of abusing their patent rights, or when the
countervailing interest is seen as important enough to justify an interruption of the rights-
holders patent duration.

Though patent law has been around for more than a century now,1 it is relevant to note that
the first substantive harmonization occurred with the adoption of the World Trade
Organization Agreement on Trade Related Aspects of Intellectual Property Rights (WTO
TRIPS). As countries were required to ratify the TRIPS Agreement if they wanted access to
the global trading regime, membership became ubiquitous and the substantive norms were
harmonized across all member countries. In the background however, decisions on what went
into the draft of the TRIPS Agreement was very controversial, with negotiators from
developed countries demanding stringent norms, while negotiators from developing countries
– who, till then, had not provided such norms – demanded more flexibilities to ensure that
their populaces were not priced out by the exercise of patent rights from incoming
multinational corporations, especially in crucial sectors such as public health. In what is
arguably one of the biggest ‘wins’ for developing country negotiators, provisions allowing for
certain uses of patented products without authorization from the patent holder, were
introduced into the text of the TRIPS Agreement.2

Of the ‘use without authorization’ licensing mechanisms, compulsory licensing is the most
prominent. The field of public health, in particular, has been the most visible in this
innovation – access tension, and compulsory licences have often been seen, even if not often
used, as a mechanism to diffuse this tension. This chapter will focus on compulsory licences
and other uses without authorization, such as Government use, Experimental use, and Bolar
exceptions, in the Indian regime as well as in the international context under the TRIPS.

Learning Outcome:
 Will understand how patent regime strikes balance with public interest with use
of compulsory licences or other uses with authorisation of the patent holder
 Will understand the relevance of compulsory licences as a tool to achieve access
to medicines in the context of pharmaceutical patents
 Will familiarise with the type of uses without authorisation of the right holder in
the Indian context
 Will understand the legal framework for issuing compulsory licences under
Article 31 the TRIPS Agreement read along with the Doha Declaration on
Public Health
 Will understand the legal regime for compulsory licences of patents in India
 The Bayer Natco dispute on compulsory licensing in the Indian context.

1 For e.g., India’s first patent law came into being in 1856. See P NARAYANAN, PATENT LAW, (3rd ed),
1998, p 4.
2 For a larger discussion around the background of the TRIPS negotiations and outcomes, see SUSAN
SELL, PRIVATE POWER, PUBLIC LAW (2003).

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 1. Compulsory licences and other unauthorized uses under TRIPS

As previous chapters have shown, patent law and policy can be structured so as to include
broad exclusions in terms of patentable subject matter, robust patentability criteria and pre-
grant and post-grant oppositions, all of which can greatly contribute towards carving out a
patent regime that ensures only genuine innovations are rewarded with patent rights.
Nonetheless, there are situations where patents can inhibit access to important products, and
permission of the rights-holder cannot be permitted to block the licensing out of that product
to ‘generic’ manufacturers. It is for these circumstances that compulsory licences (and other
unauthorized uses) were introduced, and are some of the most widely recognized TRIPS
flexibilities against patent monopolies.

Even prior to the substantive harmonization brought about by the TRIPS Agreement,
compulsory licensing had been steadily cementing its place in the legal regime of countries
across the world,3 including in India.4 Article 31 of the TRIPS Agreement is the provision
which allows for the government grant of a licence to a third party to use a patent without the
consent of the patent holder. It is to be noted though, that the phrase ‘compulsory licence’
does not find a place in the Agreement itself. Instead, the broader phrase “other use without
authorization of the right-holder” is used. Thus compulsory licensing is only part of the non-
voluntary licensing envisioned through this Article. Government use is the other main type of
unauthorized use covered by Article 31.
Apart from these two uses – there are certain exceptions that function in the nature of
unauthorized use, even though they technically find backing under Article 30, titled
“Exceptions to Rights Conferred”. These include research exemptions and Bolar provisions.

1.1 Compulsory Licensing & Governmental Use (Article 31)

As the name suggests, compulsory licensing is the legally enforced mechanism through which
patent holders are forced to license out their statutorily granted patent rights to third parties
capable of fulfilling the reasonable requirements of the public by manufacturing the patented
product at cheaper prices.

The Agreement does not list or define the situations/cases in which a compulsory licence can
be granted, but rather sets out specific conditions for the grant. These conditions include:
 Prior negotiation with the rights-holder: Article 31(b) provides that the applicant must
have attempted (and failed) for a reasonable amount of time, to have obtained a
voluntary licence on reasonable commercial terms. This is not required in cases of
“national emergency”, “other cases of extreme urgency” or “public non-commercial
use” ( or “government use”). It is also not required when a judicial or administrative
body has granted the licence for anti-competitive practices by the rights-holder. 5
However, it is required that the patentee be notified as soon as is reasonably
practicable.
 If such non-voluntary licence issues, then the patentee must receive adequate
remuneration, taking into account the economic value of the authorization.6 Further,

3 Deli Yang, Compulsory Licensing: For better or worse, the done deal lies in the balance, 17 (2012)
JIPR 76.
4 Shamnad Basheer and Mrinalini Kochupillai, The ‘Compulsory Licence’ Regime In India: Past,
Present And Future, p. 15, available at http://ssrn.com/abstract=1685129.
5 Article 31(k).
6 Article 31(h).

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 in instances of non-authorized use that fall under this part, Article 44(2) limits the
patentee’s rights to remedy to this remuneration only.
 If the circumstances under which the compulsory licence was granted, change and are
no longer validly justify the license, and are unlikely to recur, then the licence is to be
revoked.7
 The scope of the grant must be limited to the purpose for which the licence is
conferred.8
 Licences must be non-exclusive, 9 non-assignable, 10 and must be granted
‘predominantly for supply in the domestic market’. 11 However, if the license is
granted due to anti-competitive practices by the right-holder, this last condition is not
necessary.12
 There must be an independent reviewing authority to which the right-holder can
approach in appeal.13
 Where the license is for a dependent patent (where authorization to a prior patent is
required to work the latter patent), additional conditions include: 14 that the latter
patent involves an important technical advantage of considerable economic
significance as compared to the prior patent; that the rights-holder of the prior patent
be entitled to cross-licence on reasonable terms; and that the use authorized for the
first patent be assignable only with the assignment of the second patent.

Points to Remember

As can be seen, the Agreement does not provide an exhaustive list of situations in which a
non-voluntary licence can be granted, nor does it limit the grounds for such licences. Rather, it
indicates possible grounds and sets conditions for the grant of a compulsory licence. Therefore
the language in Article 31(b) which mentions national emergencies, etc (as for when voluntary
license negotiations are not required) does not limit the grant of compulsory licences to these
grounds alone. This was further clarified by the Doha Declaration which specified that
member states have the freedom to determine the grounds upon which compulsory licences
are granted.1 It also went on to state that member states have the right to determine what
constitutes a national emergency or situation of extreme urgency – and that public health
crises including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can
represent a national emergency or other circumstances of extreme urgency.

7 Article 31(g).
8 Article 31(c).
9 Article 31(d).
10 Article 31(e).
11 Article 31(f).
12 Article 31(k).
13 Article 31(i).
14 Article 31(l).

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As the compulsory licensing provision was largely seen as one that was meant to ensure
countries could remedy public health emergencies and ensure access to medicines for their
populace, several countries without local generic manufacturing capacity protested the
provision which mentioned that these licences needed to be ‘predominantly for the supply of
the domestic market’. This led to Para 6 of the Doha Declaration and the “August 30th
decision”, in 2003,15 which allowed countries with local manufacturing capacity to make and
export pharmaceutical products to countries with public health needs, by waiving previous
requirements under Article 31(f), of ‘predominant supply to the domestic market’ and
‘adequate remuneration’ for the exporting country.

While discussing non-voluntary licenses under Article 31, it is also useful to look at
“Exceptions to Rights Conferred” under Article 30, as the spirit of the provision is very
similar to the exceptions provided under Article 31, and the ambit may sometimes overlap.
Article 30 states that limited exceptions may be provided when they do not conflict with the
normal exploitation of the patent, and do not unreasonably prejudice the legitimate interests
of the patent holder, taking into account the legitimate interests of third parties. This has been
recognized as the source of two types of exceptions: Experimental use exceptions and “Bolar”
exemptions.

Experimental use exceptions under this provision, enable experimental use with registered
patents and allow implementing countries to encourage the understanding and absorption of
underlying technologies. Similarly, the ‘Bolar’ exemption permits third parties to
manufacture and use a patented product for the purposes of obtaining information necessary
for marketing approval. This allows third parties to bring their products to the market as soon
as the patent expires. A WTO panel in Canada – Patent Protection of Pharmaceuticals16 has
ruled on the Bolar exemption in 2000, holding it as compatible with the TRIPS Agreement.

In both these exceptions, the normal exploitation of the patent is not interfered with, and
interests of the rights-holder as well as third parties are balanced appropriately.

2. Compulsory Licensing in India

The compulsory licensing regime in India is encapsulated in Chapter XVI of the Patents Act,
1970, from sections 82 to 94. They can broadly be categorized as ‘abuse of patents’ and
‘public interest requirements’.

2.1 Abuse of patents

Section 84 of the Patents Act, 1970, states that ‘any party interest’ may apply for the grant of
a compulsory license17 on the following three grounds:
 that the reasonable requirements of the public with respect to the patented invention
have not been satisfied, or

15 Following the meeting on 6 December 2005 between WTO members, paragraph 6 of the Doha
Declaration and the text of the TRIPS General Council Decision of 30 August 2003 were permanently
inserted into the text of TRIPS Agreement as Art 31bis.
16 Canada - Patent Protection of Pharmaceutical Products, WT/DS114/R (17 March 2000), p. 174.
17 This application is to be made to the Controller General of Patents, Designs and Trademarks after at
least three years from the date of the grant of the patent.

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  that the patented invention is not available to the public at a reasonably affordable
price, or
 that the patented invention is not worked in the territory of India.

Any application for the grant of a compulsory license must contain at least one of the above
grounds. It is also relevant to note however, that these concepts can be overlapping. Prior to
the grant of a compulsory license though, section 84(6)(iv) of the Patents Act, 1970 requires
that “the applicant has made efforts to obtain a licence from the patentee on reasonable terms
and conditions and such efforts have not been successful within a reasonable period as the
Controller may deem fit.” This is clarified in the explanation to the clause to not ordinarily
exceed a period of six months.

2.2 Case law 1: BDR v. Bristol-Myers Squibb18

In March, 2013, BDR filed a compulsory licence application under section 84 of the Act, for
‘Dasatinib’, an anticancer drug whose patent was held by Bristol-Myers Squibb. This was
only the second compulsory licence application to be considered under the section. BMS first
sent a letter seeking a voluntary licence on 2nd February, 2012, to which BMS sent in a
response on 13th March, 2012. In their response, BMS set forth a list of queries regarding
BDR’s ability to work the patent. However, BDR did not send in a reply to this, and directly
filed a compulsory licence application the next year.

As per Rule 97 of the Patent Rules, 2003, the Controller is to notify the applicant if she is
satisfied that a prima facie case is not made out. The Controller accordingly notified BDR that
it had failed to make out a prima facie case for the grant of a compulsory license on two
grounds – the failure to make reasonable efforts to obtain a licence from the patentee, and the
failure to obtain regulatory clearance for the drug.

2.3 Reasonable requirements of the public

The test of reasonable requirement of the public is found in the national legislations of 39 out
of 41 prominent developing countries.19 Further, Article 5(a)(2)(3) of the Paris Convention
for the Protection of Industrial Property provides the lack of or insufficient working of the
patented invention as a ground for grant of a compulsory license.

The Patents Act, 1970, deems certain acts as failing the test of whether ‘reasonable’
requirements of the public have been met.20 These include:
 If by reason of refusal to grant a licence on reasonable terms, the continuance /
development of an existing trade/industry or the establishment of a new
trade/industry is prejudiced, a compulsory licence shall be granted.21
 If the demand for the patented article has not been met to an adequate extent and on
reasonable terms, a compulsory licence may be granted. 22
 If a market for export of the patented article manufactured in India is not being
supplied or developed, a compulsory licence may be granted. 23 The ambit of this
provision remains unclear and its TRIPS compliance suspect vis-a-vis Article 31(f)

18 C.L.A. No. 1 of 2013, available at ipindia.nic.in/iponew/Order_30October2013.pdf

19 CAROLYN DEERE, THE IMPLEMENTATION GAME: THE TRIPS AGREEMENT AND GLOBAL POLITICS OF
INTELLECTUAL PROPERTY REFORM IN DEVELOPING COUNTRIES 83 (2009)
20 See section 84(1)(a) and section 84(7) of the Act.
21 See section 84(7)(a).
22 Id.
23 Id.

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 which requires that compulsory licences be granted ‘predominantly’ for supply in the
domestic market. Section 90 (1)(vii) seems to qualify this provision by stating that the
Controller shall endeavour to secure that “the licence is granted with a predominant
purpose of supply in the Indian market.” However, the same sub-clause also refers to
Section 84(7)(a)(iii) for terms on which an export licence might be given, ‘if need
be.’ It must be noted that as per the Doha Declaration and its Implementation
Decision, exports of pharmaceutical products to countries with no manufacturing
capabilities is permissible.24
 If by reason of conditions imposed by the patentee upon the grant of
licences/purchase/hire/use of the patent, the manufacture, use or sale of materials not
protected by the patent, or the establishment/development of any trade/industry in
India, is prejudiced.25
 Coercive and grossly unfair licensing terms such as exclusive grant back, prevention
of challenges of validity, coercive package licensing.26
 If the patented invention is not being worked on a commercial scale to an adequate
extent in India.27 Section 83, an earlier section that describes the general principles
for interpretation, also talks about working of the patented invention on a commercial
scale.
 If the working of the patented invention on a commercial scale in the territory of
India is being prevented or hindered by the importation from abroad of the patented
article, a compulsory licence may be granted.28

2.4 Reasonably affordable price

Section 84(1)(b) requires a determination as to whether the price at which the patented
product is made available to the public is ‘reasonably affordable’ or not. This can be decided
on a case-by-case basis, however, as held by the Intellectual Property Appellate Board
(IPAB) in Bayer v. Natco29 a determination of whether a price is ‘reasonably affordable’ to
the general public does not hinge upon the costs of the product but rather from the consumers
perspective of whether or not the product is affordable. This case is discussed in greater detail
below.

2.5 Working of the patent within the territory of India

Section 84(1)(c) provides that an application for a compulsory license can be made when the
patented invention is not worked in the territory of India. In Bayer v. Natco, the IPAB linked
this working requirement to the earlier ground listed as reasonable requirements of the public.
Though the IPO held that mere import would not fulfil the ‘working’ requirement (and thus
implying that the working requirement was actually a “local working” requirement), the
IPAB held that import could amount to working and is to be decided on a case to case basis.
However, a reading of section 83 indicates that the IPO may have held an interpretation that
is more consistent with the legislation. Section 83(b) and (c) states that “Patents are not
granted merely to enable patentees to enjoy monopolies for the importation of the patented
article”, and “that the protection and enforcement of patent rights contribute to the promotion
of technological innovation and to the transfer and dissemination of technology.”

24 Paragraph 2 of the Decision dated 30 August 2003, of the General Council on ‘Implementation of
paragraph 6 of the Doha Declaration on the TRIPs Agreement and Public Health’ (the Decision).
25 See section 84(7)(b).
26 See section 84(7)(c).
27 See section 84(7)(d).
28 See section 84(7)(e).
29 MIPR 2013 (2) 97.

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 As Article 27 of the TRIPS Agreement mandates no ‘discrimination’ between locally
produced and imported patented products, there have been questions about whether a ‘local
working’ provision would be a legitimate one at all. This question was brought up in a WTO
challenge by USA to Brazil’s patent regime, which included a similar “local working”
provision, however there was no eventual ruling as the case was dropped. 30 However,
arguably, such a provision would be a valid one. In Canada – Patent Protection of
Pharmaceutical Products, 31 the WTO panel stated that ‘discrimination’ referred to
‘unjustified discrimination’, thus allowing for ‘justified’ differentiations. As the Paris
Convention (as incorporated into TRIPS)32, clearly draws a distinction between “working”
and “importing”, there is an indication that non-working, and (even if) importing, could be
treated as an abuse of the patent. Further, a local working provision is more in sync with the
promise of technology transfer that TRIPS is premised upon.33 It is to be noted that a local
working requirement does not necessitate the setting up of a manufacturing unit by foreign
companies, as licensing the manufacturer to local companies could also be used to fulfil this
requirement.

2.6 Case law 2: The Natco – Bayer compulsory licence issue

The landmark case in India is the compulsory license granted over Bayer’s patented drug
Nexavar (Sorefanib Toysylate).

Points to Remember

In August 2011, Natco, an Indian generic company applied for the grant of a compulsory
license for the anti-cancer drug, Nexavar. On March 9, 2012, the Indian Patent Office
granted the first post TRIPs compulsory license in respect of Bayer’s Sorafenib (Nexavar),
a patented medicine used for treating advanced kidney and liver cancer. The Indian patent
office (IPO) granted the licence to Natco Pharma Ltd, enabling it to produce and sell the
drug domestically, on condition of payment of a royalty pegged at 6% quarterly royalty of
net sales. The IPO held that all three grounds mentioned in Section 84 had been met,
namely that
 The “reasonable requirements of the public” were not met as Bayer supplied the
drug to only 2% of the patient population of about 8842 that required it.
 The drug, priced at Rs 2,80,000 for a month’s supply was not ‘reasonably
affordable’. (Natco was willing to supply the same at Rs 8,800 per month)
 The patent was not ‘worked in the territory of India” as Bayer did not manufacture
the drug in India but merely imported it.

30 See WTO Doc. WT/DS199/1,G/L/385,IP/D/23, 8 June 2000; WT/DS199/39, January 2001; Helene
Cooper, White House Drops WTO Claim Against Brazilian Patent Law, WALL STREET JOURNAL
(June 26, 2001 ) available at http://online.wsj.com/news/articles/SB993505161637017687
31 Supra note 18.
32 See Article 5A(1), Art 5A(2), Art 5A(4) and Art 5B of the Paris Convention for the Protection of
Industrial Property, 828 UNTS 305.
33 The objectives listed in Article 7 of TRIPS open with: “the protection and enforcement of
intellectual property rights should contribute to the promotion of technological innovation and to the
transfer and dissemination of technology.”

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Bayer then took this in appeal to India’s specialized IP tribunal, the Intellectual Property
Appellate Board (IPAB). On March 14, 2013, the IPAB upheld the license and confirmed all
three grounds mentioned in the order of the Patent Controller, though there were some
differences in the particularities. Notably, the IPAB also helped that even though the grounds
in section 84 were separate and individually sufficient as bases for the grant of a compulsory
licence, the grounds were linked such that the failure of one ground would likely trigger
another ground.

For determining whether the ‘reasonable requirements’ of the public had been met, the IPAB
considered the following factors in making an assessment:
 the need for the drug in terms of patient pool;
 the volume of the drug supplied by Bayer to the market, both with and without its
Patient Assistance Program;
 the effect of the price on the availability of the drug to the public – and found that the
price of Rs 2.8 lakhs per month was prohibitively expensive;
 whether Bayer’s patient assistance program could be considered as contributing to
Bayer’s standard for working – and found that only ‘commercial use’ was relevant to
whether the reasonable requirements of the public were being met, as patient subsidy
programs being voluntary and insufficient, were unable to meet the requirement;
 the volume of imports by Bayer – and found that the volume was sufficient to meet
only 2% of the needs of patients;
 whether local manufacture was required to be considered ‘working of the patent’ –
and held that even if only imports were considered, the volume did not meet the
requirement of the public anyway.
Thus, the IPAB, on considering the above factors, and on finding that the insufficient
numbers and the prohibitively expensive product, held that Bayer was not satisfying the
reasonable requirements of the public for the drug.

The IPO and the IPAB both held that determination of whether a price was “reasonably
affordable” to the general public hinges not on the research and development related costs of
the drug, but rather on the drug is affordable from the consumer’s perspective.

“The reasonably affordable price necessarily has to be fixed from the view point of the public
and the word, ‘afford’ itself indicates whether the public can afford to buy the drug and
therefore, we must consider this question from the view point of whether Rs.280,000/- per
month is reasonably affordable price to the public. All the evidence filed by the appellant; the
affidavits, the reports, etc. relating to the cost are not relevant to decide what the public can
reasonably afford.”34

Further, the IPO and IPAB also held that a “reasonably affordable” price strongly co-relates
with whether or not the reasonable requirements of the public are being met under section
84(1)(a).35 Notably, the IPAB also mentioned that a company facing a compulsory license
grant on this ground, could escape this provision by revising their pricing.

As for remuneration, the IPAB held that Natco was required to increase its royalty payment
from 6% of its net sales, to 7%.

34 Bayer v. Natco, supra note 14, at para 40.

35 Bayer v. Natco, supra note 14, at para 38.

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The IPO and the IPAB differed on whether ‘worked in the territory of India’ could include
imported products as well. The IPO held that mere imports could not amount to working36
while the IPAB held that the working requirement doesn’t necessarily exclude imports, and
therefore that mere imports could satisfy the working requirement and this was to be decided
on a case to case basis.37

2.7 ‘Public Interest requirements’

Section 92 allows the Government to issue a notification in the Official Gazette that a
compulsory licence should be granted in respect of any patent, (regardless of lapse of time
since grant), in cases of:
 National emergency; or
 Extreme urgency; or
 Public non-commercial use.

Following this notification, any interested party can apply and be granted a licence on terms
and conditions as the Controller sees fit.38 Further, the Controller is to ensure that products
manufactured under this licence are made available at the lowest possible price with the
patentees deriving a reasonable advantage from their patent rights. 39 These are broadly
considered the ‘public interest’ grounds. There is yet to be an explanation or clarification as to
the extent of these terms. The section does specify though, that included in this criteria are
‘public health crises, relating to Acquired Immuno Deficiency Syndrome, Human Immuno
Deficiency Virus, tuberculosis, malaria or other epidemics’.

As of the writing of this module, the government is considering a section 92 notification for
three drugs - Bristol-Myers Squibb’s ‘Dasatinib’ and ‘Ixabepilone’ (used for treatment of
leukemia and breast cancer respectively) and Roche’s Herceptin (also used for treatment of
breast cancer).40 However, there is yet to be a formal notification for the same.

3. ‘Compulsory licence for export of Pharmaceutical Products’

Section 92A was introduced in the 2005 amendment so as to implement the Doha Para 6
decision.41 Provided that a country with insufficient or no manufacturing capacity has issued a
compulsory licence over a patented pharmaceutical product, this provision makes a
compulsory licence available for the manufacture and export of such patented pharmaceutical
products. When the Controller receives such an application, the Controller is to grant the
compulsory licence solely for the manufacture and export of such patented pharmaceutical
product under terms and conditions as specified by him. It is to be noted that this section is
limited to pharmaceutical products which are needed to address public health problems,
including necessary ingredients and diagnostic kits.

36 Natco v. Bayer C.L. N. 1 of 2011, available at

http://www.ipindia.nic.in/iponew/compulsory_license_12032012.pdf at p. 44: “From all the
aforementioned indications, it is clear to me that the Paris Convention and TRIPS Agreement and
Patents Act, 1970 read together do not in any manner imply that working means importation. I am
therefore convinced that ‘worked in the territory of India’ means ‘manufactured to a reasonable extent
in India.”
37 Bayer v. Natco, supra note 14, at para 52.
38 See section 92(1).
39 See section 92(2).
40 Health Ministry recommends compulsory licensing of three anti-cancer drugs, PHARMABIZ.COM
(May 3, 2013), available at: http://www.pharmabiz.com/NewsDetails.aspx?aid=75138&sid=1
41 Supra note 17; TRIPS Council Decision, WT/L/641, 6.

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This provision has come up only once so far, in 2008 when Natco, a leading Indian generic
manufacturer applied for a compulsory licence under section 92A, to export two patented
drugs to Nepal. Natco submitted that Nepal was facing a public health crisis and lacked the
manufacturing capability to produce the required anti-lung-cancer drug. However, on a
hearing granted to the patent holders, Roche and Pfizer, the IPO noted that Nepal had not
issued any relevant public health crises drug requirements. Natco withdrew its application
soon after this.42

4. ‘Compulsory licence of mailbox application related patents

Section 11A(7) states that after a patent is granted in respect of applications made under the
mail-box system, the patent-holder shall only be entitled to receive reasonable royalty from
such enterprises which have made significant investment and were producing and marketing
the concerned product prior to the 1st day of January, 2005 and which continue to
manufacture the product covered by the patent on the date of grant of the patent and no
infringement proceedings shall be instituted against such enterprises. Thus, generic
manufactures who were producing drugs in relation to which patent applications are/were
pending by way of the mailbox system, can continue such manufacture pursuant to the grant
of a patent to the applicant without being sued for infringement. The onus of negotiating
reasonable royalties lies on the patentee.43 Thus, in the famous Novartis AG v. Union of India
case, 44 even if the court had upheld Novartis’ patent, Cipla would be able to continue
manufacture of Imatinib provided it paid reasonable royalties to Novartis. What constitutes
reasonable royalties remains open. A suggestion to introduce a cap in royalty rates under this
clause was rejected by Parliament indicating that it is open for negotiation and determination
on a case by case basis.45

5. Government use, and other unauthorized uses in India

5.1 Government Use

Aside from compulsory licences, Article 31 of the TRIPS Agreement also envisages non-
voluntary licences in the form of “Government Use” licences. This is covered by the Indian
patent regime in Chapter XVII (sections 99 to 103) and section 47, which provides that in
certain cases, the government can use a patented product without infringing upon the product.

Chapter XVII, titled “Use of inventions for purposes of Government and acquisition of
inventions by Central Government”, allows the Central Government, or any person
authorized by it, to use the invention for the purposes of the Central Government,
State Government or a Government undertaking on terms of remuneration similar to that of
Compulsory licences. Unlike compulsory licences though, these provisions can be attracted
even at the application stage, rather than solely post grant. Even here though, remuneration

42 Shamnad Basheer, Breaking News: Natco Withdraws "Doha" Compulsory Licence Application,
SPICYIP, September 28, 2008, available at http://spicyip.com/2008/09/breaking-news-natco-withdraws-
doha.html.
43. Shamnad Basheer and Mrinalini Kochupillai, The ‘Compulsory Licence’ Regime In India: Past,
Present And Future, p. 17, available at http://ssrn.com/abstract=1685129.
44 Novartis AG v. Union of India (2013) 6 SCC 1.
45 See Lok Sabha Debate, 22 March 2005, at
http://164.100.24.230/Webdata/datalshom001/dailydeb/22032005.htm.

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clauses remain the same. The government will be free to sell such licenced products on a non-
commercial basis.

However, it is notable that this chapter states that when a patent is cited or recorded, or when
there is other evidence of the working of the invention prior to the priority date on the
relevant claim on the patent, then the Government Use will be free of royalty or any other
remuneration to the patentee.

Section 47(4) on the other hand, as a conceptual supplementary provision to section 92A
compulsory licences (pharmaceutical products for export), permits the import of any patented
medicine by the Government “for the purpose merely of its own use or for distribution in any
dispensary, hospital or other medical institution maintained by or on behalf of the
Government or any other dispensary, hospital or other medical institution”. Unlike other
government use provisions though, this provision can only be attracted after the grant of the
patent.

5.2 Experimental Use Exception

The Indian patent regime makes use of the flexibilities provided by Article 30 of the TRIPS
Agreement. By implementing an experimental use exception, the regime allows third parties
to fully understand and study products that have been granted patents, rendering a holistic
satisfaction of the reason for the disclosure requirement – that patent applicants must fully
describe and disclose best methods of working, of the patent that the applicant is seeking. 46
Indian law is a broad interpretation of this experimentation provision, as it not only allows
‘any person’ to make use of the experimental exception for purposes of merely of experiment
or research, but specifically including ‘the imparting of instruction to pupils’ within the
exception.47 As this falls within the Article 30 requirement of not unreasonably prejudicing
legitimate interests of the patentee and the normal exploitation of the patent,48 this does not
fall afoul of India’s TRIPS obligations. Given that TRIPS aims to ramp up the technological
capabilities of developing countries, this sort of a broad interpretation also furthers its
objectives by encouraging the development of follow-on inventions and improvements, as
well as encouraging the inventing around of patented inventions.49

5.3 Bolar Exemption

As described earlier, Article 30 also allows for the existence of the Bolar exception. This
exception, especially relevant to the pharmaceutical field, takes its name from an American
case, Roche Products v. Bolar Pharmaceuticals Co,50 where Bolar Pharmaceuticals had made
a public policy argument that parties should be allowed to obtain information necessary to
procure regulatory approval for a generic, so that they could be ready to launch as soon as the
patented drug’s period expired.

Section 107A provides for the exception in Indian law:

46 Janice Mueller, No "Dilettante Affair": Rethinking The Experimental Use Exception To Patent
Infringement For Biomedical Research Tools, 76(1) Washington L. Rev. 1, 5 (2001).
47 See section 47(3).
48 See discussion on Article 30 in Part II of this chapter.
49 Shamnad Basheer & Prashant Reddy, The “Experimental Use” Exception Through a
Developmental Lens, 50 INTELL. PROP. L. REV. 831, 832 (2010).
50 Roche Products Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984).

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(a) any act of making, constructing, using, selling or importing a patented invention solely for
uses reasonably related to the development and submission of information required under any
law for the time being in force, in India, or in a country other than India, that regulates the
manufacture, construction, use, sale or import of any product;

This is especially relevant in India due to India’s large generic pharmaceutical industry. It can
be noted that the exception also allows exempts usage when information is sought to gain
regulatory approval outside India.

Summary
India employs a wide range of TRIPS flexibilities in her domestic law – of which compulsory
licensing has garnered some of the most attention. The pharmaceutical – healthcare field is
the best example of Due to the unique position that India finds herself in, India must balance
concerns of a burgeoning industry along with the (access) concerns of a largely poverty
stricken mass as well. As this chapter has shown, in the area of non-voluntary licensing –
where patent rights come in conflict with larger social concerns – India has carved out a well
thought out nuanced patent regime.

As a brief summary – stemming from Article 31 of the TRIPS, are section 84 (patent abuse)
and section 92 (public interest) exceptions, as well as government use exceptions as under
sections 99-103 and section 47. Stemming from Article 30 are the tangential but related
experimental use exceptions and the bolar exemptions.

In the case of patent abuse - once reasonable efforts have been unsuccessfully made in
obtaining a voluntary licence, an interested party can file an application for the grant of a
compulsory licence by showing one of three conditions (though they are usually interrelated):
 that the reasonable requirements of the public with respect to the patented invention
have not been satisfied, or
 that the patented invention is not available to the public at a reasonably affordable
price, or
 that the patented invention is not worked in the territory of India.
Amongst these criteria, the definition of ‘working’ is still under some scrutiny, despite the
IPAB having defined it as possibly including mere imports. More specifically, strong
arguments for ‘working’ here to refer to a ‘local working requirement’ have not been
addressed yet.

Compulsory licences can also be granted for exporting products to countries that do not have
local manufacturing ability under certain circumstances.

In the case of public interest – the government can issue a notification for the grant of a
compulsory licence over a product in the cases of:
 National emergency; or
 Extreme urgency; or
 Public non-commercial use
Aside from these main headings, compulsory licences are also available for mailbox
applications where the products have already been worked by generics, and for cases of
export where another country with insufficient/no manufacturing capacity requests for such
supply.

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In the case of governmental use, or acquisition of inventions by the Central Government,
licences can be granted over patented products, or even applications, to use for the purposes
of the government.

Finally, the research exceptions stem from Article 30 of the TRIPS Agreement. Both the
experimental use exception, as well as the Bolar exemption permit technological study and
research to occur without disturbing the normal exploitation of the patented product, and
permit quicker diffusion of technology on to the market once the patent period expires.

Self-check Exercises

 What are compulsory licences and how are they different from voluntary licences?

 Does TRIPS prescribe or proscribe any grounds for compulsory licensing?

 What is the Doha Declaration on TRIPS and Public Health

 Can compulsory licences be issued without payment of adequate remuneration?

 How many compulsory licenses has India issued since the signing of the TRIPS Agreeement?

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