Compulsory Licenses

What Is A Compulsory License?

• Compulsory licensing is when a government allows a third party to produce a patented product
or process without the consent of the patent owner or plans to use the patent-protected invention
itself.

• Article 31 of TRIPS (which pertains to use without authorization of the right holder) lays down
the set of conditions that govern the use of compulsory licensing by WTO members, the most
important of which are the following:

• (a) The entity applying for a compulsory license should have been unable to obtain a voluntary
license from the right holder on "reasonable" commercial terms;

• (b) If a compulsory license is issued, adequate remuneration must be paid to the patent-holder;
and

• (c) A compulsory license must be granted mainly to supply the domestic market.
 Compulsory Licensing Under Indian Law:
• Under the Indian Patent law, Compulsory licenses have been dealt with under
the Chapter XVI of the Indian Patent Act, 1970. The act further mentions the
prerequisites for the grant of a compulsory license under Section 84-92 of the
Indian Patent law.
 Applying For Grant Of A Compulsory License:
• Section 84 of the Indian Patent Act provides that an application to the Controller
for the grant of compulsory license may be made by any person interested
including the license holder after the expiration of a period of three years from
the date of grant of a patent on fulfillment of any of the following conditions:

1. Reasonable requirements of the public with respect to the patented invention

have not been satisfied, or

2. Patented invention is not available to the public at a reasonably affordable

price, or

• Patented invention is not worked in the territory of India.

• Under the Indian Patent Act, the reasonable requirements of the public are
deemed not to have been satisfied where:
• The patentee refuses to grant a license or licenses on reasonable terms; and
• a trade or industry is prejudiced; or
• demand for the patented article has not been met to an adequate extent; or
• a market for exportation of the patented article manufactured in India is
not being supplied or developed; or
• the establishment or development of commercial activities in India is
prejudiced.
• The patentee imposes a condition on the patented invention;
• Non-working of the patent in the territory of India;
• Working of the patented invention in India on a commercial scale is prevented
by the importation from abroad.
• 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.

• Under Section 100 of the Indian Patent Act, compulsory license can be issued by the
Government on a patented drug for use by the Government.

• Under Section 102 of the Indian Patent Act, Government can obtain a pending or already
granted patent for public use. In return the Government must pay the patentee royalties as
mutually agreed upon between the parties.
 India’s first case of granting compulsory license–

Bayer Corp. v. Natco Pharma

• 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.
 Procedure for granting a compulsory license

• Under section 87 of the Indian Patent Act, upon filing the application for grant of
compulsory license, the Controller at the Indian Patent Office (Controller) shall analyze
the prima facie case made by the applicant against the patentee. The Controller takes into
consideration:
• The nature of the invention;
• The applicant’s ability to work the invention;
• Whether the applicant made any efforts to reasonably obtain a license from the patentee;
• If such efforts have not been successful within a reasonable time period.
• A notice will be issued to the applicant if the Controller is unsatisfied with the request and
will provide a statement rejecting the compulsory license. The applicant may request a
hearing with the Controller, within a month from the date of notice of rejection. At the
conclusion of the hearing, the Controller will decide the matter.