India: "Compulsory Licensing" – Every Request For Compulsory License Will Not Be Granted And Special Powers Of The Government In Exceptional Circumstances

Last Updated: 14 March 2017
Article by Aayush Sharma

Most Read Contributor in India, July 2017

The issue of compulsory licensing of patents has been deliberated, discussed and commented upon at several forums. In India, the first compulsory license which was granted by the Patent Office on March 9, 2012 to Natco Pharma, an Indian company, for generic production of Bayer Corporation's Nexavar, a drug used for the treatment of Liver and Kidney cancer, is very well known example of grant of compulsory license. After the said decision of grant of compulsory license, the pharma companies started paying a lot of attention in selecting composition/drugs to apply for patent in India, drafting of specifications, launch of new drugs, licensing and assignments of related patents, drug pricing in India, etc. Under the Patents Act, 1970 (the Act), the enabling provision for compulsory license is Section 84, which stipulates conditions for grant of a compulsory license, viz., if (a) the reasonable requirements of the public with respect to the patented invention have not been satisfied, (b) the patented invention is not available to the public at a reasonably affordable price, or (c) the patented invention is not worked in the territory of India.

Before applying for the compulsory license under above mentioned conditions, the applicant is first required to make an attempt to get a voluntary license from the patentee. When the applicant is unable to procure a licence at reasonable and equitable terms within the prescribed period (6 months), the applicant can file a request for compulsory licensing before the Controller. In BDR Pharmaceuticals Pvt. Ltd. Vs Bristol Myers Squibb, the Controller rejected BDR Pharmaceuticals' application for compulsory license for BMS cancer drug SPRYCEL. The Controller unequivocally said that before going to the merits of the case, the threshold requirement of establishing a prima facie case of the applicant who is desirous of having the compulsory licence must be satisfied. Further, Controller in the said case observed that BDR Pharmaceuticals had not made any credible attempt to procure a voluntary license from the Patentee and hence the conduct of BDR did not satisfy the statutory requirement the application shall negotiate for a license from the Patentee in good faith for at least 6 months. In view of the same, the Controller refused the BDR Pharmaceuticals' application for compulsory license.

Special Provisions upon notification by the Government of India for compulsory license: Section 92 of the Act deals with the compulsory license which are granted and reviewed by the Government of India for public interest in case of national emergency, extreme urgency or public non commercial use. The said section enables the Government of India to notify to the public such extreme circumstances, whereupon, any person interested can apply for a compulsory license and the Controller in such case may grant to the applicant a license over the patent on such terms and conditions as he thinks fit. In settling the terms and conditions of a licence granted, the Controller shall assure that the articles manufactured under the licensed patent shall be available to the public at the lowest prices consistent with the patentees deriving a reasonable advantage from their patent rights.

Section 92 also states various public health crises relating to acquired immuno deficiency syndrome, human immune deficiency virus, tuberculosis, malaria or other epidemics.

Compulsory licence under section 92A: For exports of patented pharmaceutical products in certain exceptional circumstances (The Indian Patents Act had introduced the section 92A in the 2005 amendment which was exactly the replica of the Doha Declaration)

Under TRIPS agreement, Article 31(f) has provided a provision in case of exceptional circumstance and on mutual requirement between the two countries; the compulsory license can be issued. According to the said Article and Section 92A of the Act, the compulsory licence shall be available for manufacture and export of patented pharmaceutical product to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems. This provision is applicable for countries which allow importation of the patented pharmaceutical products from India. Upon receipt of an application in the prescribed manner, the Controller shall grant a compulsory licence mainly for manufacture and export of the concerned pharmaceutical product(s) to such country under reasonable terms and conditions. Interestingly, this Section is silent on royalty to be given to the Patentee; however, the same totally depends upon the Controller to provide "adequate" remuneration (pursuant to Art 31 [h] of TRIPS) to the patentee.

In the year 2004, Canada became the first country to implement "Doha style compulsory license" for the export of generic version of patented drugs to countries with calamitous public health problems. The Canadian Pharma company APOTEX had agreed to license hiv/ AIDS drugs and obtained a two-year-compulsory license on the nine Canadian patents for manufacturing 15.6 million tablets and exporting them to an African country - Rwanda12. Another case can be seen in the Indian jurisdiction on 15th September, 2007 when a Hyderabad-based generics manufacturer Natco Pharma Ltd filed an application for a compulsory license before the Controller. Natco had a licence from Nepal to import Erlotinib, patented in India by Swiss firm Roche under the brand name Tarceva, and Sunitinib, patented by US firm Pfizer Inc under the name Sutent. Natco Pharma contends that the generic versions can be manufactured at one-fifth the cost of the patented drug of the innovators and since Nepal is regarded as a least developed country [LDC], accordingly, Natco does not need to establish that Nepal has insufficient manufacturing capacity and hence Natco was legally permitted to obtain a compulsory license to override the patents for public health reasons (relying on Section 92A & Article 31 of the TRIPS Agreement).

Apart from granting the power to the Government of India to notify the national emergency or extreme urgency, the said provision is silent on further parameters according to which the discretion could be exercised by the Government. Another important question is whether the public non-commercial use requirement (as in section 84) shall be seen in context of a national emergency or health crisis, or rather that same is an independent criterion.



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