COMPULSORY LICENSE OF PATENTS: A comparative analysis on compulsory license of patents in India, EU, US and Japan

Mar 7, 2025 | Patent

Compulsory licensing refers to a legal means by a government that permits a third party to make, use, or sell a product or invention without the consent of the patent owner. The patent owner retains their patent rights, but they are entitled for a renumeration for the use. This is an exception to the general rule that only the patent owner has the authority to control the use of their invention.

The legal framework for compulsory licensing are established through international agreements such as [1]TRIPS Agreement and the [2]Paris Convention, as well as in the domestic laws of the countries.

Since compulsory licensing limits the intellectual property rights of an individual, it is considered as a serious measure and may lead to different opinions about the fairness or advantages for the economy. In rare cases, if a company with substantial market power refuses to share its technology, a competition authority may intervene and mandate the issuance of the license to others because keeping it to themselves would be unfair.[3]

Compulsory License of patents In India

Legal Provisions

Section 84 of the Indian Patents Act,1970 [4]–

  • Any interested party  can appear to the Controller ( Patent Authority) after 3 years from the date a patent is granted, to apply for a compulsory license for the invention if:
  • The needs of the public are not being met.
  • The product is not available at a reasonable price.
  • The invention is not being used in India.[5]
  • An individual who already has a patent license can also appear for compulsory stating the reasons as mentioned in subclause. (1)
  • The application must include the applicant’s interest and the required facts supporting the claim.
  • The controller will grant a license is he agrees with the conditions stated in subclause. (1)

The Controller may also use the provisions in Section 88 (Powers of Controller in granting compulsory licences)[6] while ordering the patentee to grant a license.

  • While deciding on the application, the Controller will consider:

(i) Nature of the invention, time since the patent was granted, and steps taken by the patent holder to use the invention.

(ii) If the applicant can use the invention in a way that helps the public.

(iii) If the applicant has the resources and is ready to take the financial risk.

(iv) Whether the applicant tried to get a licence from the patent owner on fair terms and failed within a reasonable time (usually not more than 6 months).

However, in cases of national emergency, urgent need, public use, or if the patentee has used anti-competitive practices, this condition does not apply.

  • The public’s needs are considered not met if:

(a) The patentee refuses fair licences, which:

    • harms existing/new Indian businesses or industries,
    • fails to meet demand,
    • limits exports from India,
    • harms commercial activities in India.

(b) The patent holder sets unfair conditions that hurt Indian trade or the use of non-patented materials.

(c) The patent holder forces:

    • exclusive licence returns (grant-backs),
    • bans on challenging the patent, [7][8]
    • or bundled licences (coercive packages)

(d) The invention is not used enough in India or not as much as reasonably possible.

      (e) The use of the invention in India is restricted due to imports by:

      • the patentee,
      • those buying from the patentee,

or others whom the patentee has not acted against[9] [10]

Section 88 of the Indian Patents Act,1970 (Powers of Controller in granting compulsory licences) [11] [12]

(1) If the patent owner has imposed unfair conditions, the Controller can allow the applicant and their customers to use the patent

(2) If the applicant had a license and applied again, the Controller can cancel the previous license or change it.

 (3) If the patent owner has more than one patent and the public’s needs are not being met for some of the patents or they cannot be used without the use of others, the Controller can provide permission to use the other patents too.

 (4) f the terms and conditions of a licence were set by the Controller, and the licensee has commercially used the invention for at least 12 months, and finds that:

  • The conditions have turned out to be harsher or more difficult than expected,
  • And this is causing a financial loss,
  • Then the licensee may apply to the Controller to revise the licence terms.

It should be noted that the request can only be made once , no second application is allowed.

Section 92 of the Indian Patents Act,1970 (Compulsory licences in Emergencies)[13] [14]

The Central Government by notification in the Official Gazette can grant compulsory license at the time of national emergency, extreme emergency or at the time of public use. This can apply to one patent or a group of patents. After the Controller grants the patent , the applicant is free to use the patent. However, it should be noted that the product must be priced at the lowest possible cost and the patentee must get a reasonable return for their invention.

This helps establish a balance between public interest and the rights of the patent holder. [15]

Section 92 A of the Indian Patents Act,1970 (Compulsory licences for Export of Pharmaceuticals)  [16] [17]

The provisions under Section 92A allows the Indian pharmaceutical companies to manufacture and export the medicines to other countries in case of emergencies.

Such exports are permitted in a case where receiving country is experiencing a global crisis, and the country lacks the capacity to produce the medicines themselves.

The importing country must demonstrate that they have obtained a compulsory license to import the drugs/medicines, or they are legally authorized to import under their country’s domestic laws.

This ensured that the countries have access to medicines during emergencies while still respecting the patent laws.[18]

Africa HIV-AIDS case and Doha declaration

The HIV/ AIDS epidemic in Africa created an urgent need to import the cheaper solutions through importing the medicines from other countries. However, this triggered several disputes with major multinational companies and raised concerns over the violations of TRIPS agreement. The intervention by the WHO helped the process to be completed smoothly.  Similar circumstances observed in Brazil increased the awareness to the inadequacies in the TRIPS agreement. These developments led to the implementation of the Doha Declaration on the TRIPS Agreement and Public Health in November 2001[19].[20]

The Doha Declaration brought more awareness about the major inadequacies and shortcomings in the TRIPS agreement. The declaration stated that no country should be deprived of adequate care and TRIPS should strive to achieve it. At the same time it should be in compliance with the rules of WTO. The Doha Declaration affirmed the right of WTO member states to issue the compulsory licenses in situations of public health emergencies such as HIV/AIDS. Paragraph 6 of the Declaration[21] recognized that LDCs might struggle to utilize CL effectively due to limited manufacturing capability, prompting the 2003 WTO waiver.

The Declaration on TRIPS Agreement and public health was a key factor behind the introduction of Section 92 A[22] of the Indian Patent Act. The Section 92A was introduced in response to the decision of WTO on compulsory licensing for the export of patented pharmaceutical products to countries with insufficient or no manufacturing capacity.[23] [24]

The declaration also helped in the enforcement of a new waiver that led to the establishment of Article 31bis in 2017 [25]. The purpose of the article is to enable countries like India to export affordable generic medicines, primarily for the treatment of HIV/AIDS, to least developed countries.

The establishment of Section 92 A has helped underdeveloped countries such as Rwanda, Zimbabwe and Cameroon to acquire the affordable medicines for the treatment of HIV/AIDS. Indian pharmaceutical companies such as Cipla and Hetero that manufacture generic medicines have played a crucial role in global access of the medicines to antiretrovirals (ARVs). These efforts have drastically reduced the treatment costs from around $10,000 per patient per year in 2000 to under $150 by 2006, thus proving the effectiveness of Section 92A, along with the Doha declaration in supporting the global health rights.[26][27]

Section 94 of the Indian Patents Act,1970 (Temporary Compulsory License)[28] [29]

The compulsory license may be revoked by an interested party or the patent holder by filling out the Form 21 and submitting it along with the evidence of the original conditions under which the compulsory license was granted and the changed conditions requiring the cancellation of the license. Additionally, a copy of the application and evidence has to be submitted to the individual holding the compulsory licence and the Controller must be informed after the service is completed.

The individual holding the license has a right to file an objection within one month from the date when the Controller receives the application for cancellation.

Finally, the Controller may choose to schedule a hearing before making a final decision. In case the Controller decides to terminate the compulsory licence, both the parties will recieve a formal order with any terms and conditions related to the termination.[30]

Case Laws

Bayer Corporation v. Union of India & Others (IPAB, 2013)

Facts of the Case –

Bayer Corporation held an Indian patent for Sorafenib a drug used to treat liver and kidney cancer (marketed as Nexavar), where Bayer had fixed the price of Nexavar at ₹2.8 lakh/month, making it unaffordable to majority of the patients in India.

Thus, Nacto Pharma, an Indian pharmaceutical company that manufactures generic medicines applied for a compulsory license to manufacture and sell the drug at ₹8,880/month, under the provision of Section 84 of the Indian Patents Act,1970 [32]

It is to be noted that Bayer Corporation had refused the request of Natco Pharma for a voluntary license.[33]

Controller’s Decision-

The Controller of Patents had granted the first compulsory license in India to Nacto Pharma.

The decision held that Bayer Corporation failed to:

    • Meet the reasonable public requirement.
    • Provide the drug at a reasonably affordable price.
    • Work the patent in India (i.e., no local manufacturing).

Thus, the Controller ordered Natco Pharma to pay 6% royalty on sales to Bayer Corporation.

Issues on Appeal (by Bayer)-

Fulfilment of procedural requirements by Natco Pharma under Section 84.

  • Whether Bayer’s pricing and distribution were sufficient.
  • Whether infringement by another company (CIPLA) could be considered in meeting public demand.
  • Whether the royalty was too low.

IPAB Ruling (March 2013)-

The IPAB upheld the order of the Controller to grant the compulsory license and increased the royalty amount to 7%.

It was upheld that “Reasonable affordability” must be assessed from the perspective of the patients from India. CIPLA was not required to meet the public requirement that must be met by the patentee.

  • The working requirement means actual availability, preferably through local manufacture.
  • A single refusal of a voluntary license request is sufficient.

 It was held that public interest and access to essential medicine takes precedence over the monopoly rights of the patentee.[34] [35]

Lee Pharma v. AstraZeneca (C.L.A. No. 1 of 2015)

Facts of the Case-

  • Lee Pharma, an Indian pharmaceutical company manufacturing generic medicines, applied for a compulsory license (CL) to manufacture and sell SAXAGLIPTIN, a drug for Type-II Diabetes, sold by AstraZeneca under brand names Onglyza and Kombiglyze XR. The patent for SAXAGLIPTIN was previously granted to Bristol Myers Squibb (BMS), and was later assigned to AstraZeneca in 2014.
  • Lee Pharma filed the CL application under the provision of Section 84(1) citing:
    • Reasonable public requirements are unmet.
    • Unaffordability of the drug.

Further, the patent was not being worked in India.

Controller’s Findings-

The Controller held that similar diabetes medications were already available in the market, and therefore the argument of Lee Pharma for the grant of compulsory license was not upheld. It was also found that both companies priced their products in the same range. AstraZeneca was importing the medicine into India, which was deemed sufficient to indicate as “working” the patent, whereas Lee Pharma failed to provide sufficient evidence to show otherwise.

Outcome-

The Controller rejected the compulsory license application.

  • Held that no prima facie case was made under Section 84(1).
  • Decision favoured AstraZeneca, stating the drug SAXAGLIPTIN was not eligible for compulsory licensing.[3

India and TRIPS agreement and its effect on compulsory licensing

Before joining the TRIPS agreement[37] [38] India would allow new drugs to be sold without patent protection. After joining TRIPS agreement, great protection was given to the patent right holder in the aspects of quality, availability and pricing of the drugs.

India had also added a feature of comprehensive compulsory license to protect public health and ensure availability of affordable medicines.[39]

 

COMPULSORY LICENSE OF PATENTS IN  EU

Introduction

The EU has made a proposal wherein the European Commission can grant compulsory license, and additional protections would be provided during an emergency or a crisis, thus increasing the availability of the medicines to individuals during a crisis.

The European Parliament has stated that initially the companies will be given an option to grant a compulsory license voluntarily. They will have a period of 4 weeks to decide before a compulsory license is issued. This regulation excludes gas, chips and defence. It should also be noted that the licensee will bear the responsibility for any damages. The licensee will be liable for an amount between €300,000 (or €50,000 for small businesses) .[40]

The Commission also has two major roles. Firstly, it must explain itself if it does not follow expert advice. Secondly, it must identify the patent owner.

Patent owners must also be duly paid and duly on time. A 4% cap on payments to patent owners has been removed, except in special cases such as medicine exports in health emergencies.

The Commissioner may ask the patent owner to share relevant information, where the patent owner has a provision for receiving a compensation for the use of their patent.[41]

 

Compulsory Licensing for Pharmaceuticals

During the rise of the COVID-19 pandemic many questions arose about the compulsory licensing of patents. It was contended that licensing should be provided during emergencies.

Even though EU provided compulsory licensing many challenges still preside –

  • There is no EU wide license available – Each EU country makes its own laws regarding compulsory licensing and that law is applicable only in that specific country. The EU itself cannot provide licenses which are applicable to every Member State.
  • Article 31bis of TRIPS[42] [43] allows countries to import drugs that are under the preview of compulsory licenses. Unfortunately, EU had decided not to follow the TRIPS regulations, therefore an EU country is now allowed to import drugs from other countries. Further, EU is not allowed to import drugs from other EU member states. Therefore, a country under European Union (EU) solely relies on its own domestic production. [44]
  • In order to sell a medicine, the companies must provide data to the European Medicines Agency (EMA). The data is protected for a period of 8 years and is protected from the public unless a waiver affiliated with it. Without a waiver, even if a licence is granted, the licensee is prohibited from accessing the data required to gain approval.
  • In Belgium, the private entities are allowed to seek a compulsory license whereas the government is prohibited to do so. This regulation is heavily criticised stating that it hinders the process during the times of emergencies relating to public health.

An alternative to this could be the voluntary granting of the compulsory licenses by the patent holders or groups such as the WHO COVID-19 patent pool and Open COVID Pledge[45] encouraging the companies to share their patents freely for the greater good. Such provision ensures a faster and more cooperative way to access informaiton across borders.

The EU has legal tools for compulsory licensing, but they are complicated and limited. A better coordination, updated rules and regulations, and the possibility of rejoining the TRIPS import system could offer support. But for now, the voluntary solutions such as patent pools remains the most practical way forward.[46]

Case Law

Merck Sharp and Dohme v. Shionogi (2017, German Federal Court of Justice)

A US based pharmaceutical company, Merck Sharp and Dohme or MSD was supplying an HIV drug called Isentress (containing Raltegravir) in Germany. A Japanese company, Shionogi held a European patent for Raltegravir in Germany. Shionogi informed MSD regarding the patent infringement caused by Isentress, where MSD eventually proposed a one-time global license payment of $10 million USD, which Shionogi rejected as insufficient. The negotiations lasted a period of 2 years, without reaching an agreement.

In August 2015, Shionogi filed a patent infringement suit in the District Court of Düsseldorf. MSD responded by initiating opposition proceedings to invalidate the patent. In 2016, MSD sought a compulsory license under Section 24 of the German Patent Act[48][49], and a preliminary injunction under Section 85 PatG[50] [51] to continue selling Isentress.

On 31 August 2016, the Federal Patent Court granted MSD a preliminary compulsory license and this decision was upheld by the Federal Court of Justice on 11 July 2017.[52] [53]

COMPULSORY LICENSE OF PATENTS IN US

 

Introduction

Many countries have opted for compulsory licensing due to their being an inadequacy of supply, public interest and use within a country.

However, the US has not completely embraced this approach. Instead it relies on a similar version called the March-in Rights, established under the Bayh-Dole Act, 1980[54][55]. The law states that ‘if an invention is made in the US, the government has the authority to“march in” and allow another party to use the invention provided that the invention is not made in their country and the invention has not been made available to the public.

Important Provisions

  • 28 U.S.C. § 1498(a)[56][57] – Government Use Provision: The statute allows the government to access any patented invention without authorization, provided the patent holder is compensated by a reasonable compensation. Although not labelled as compulsory licensing, this provision overrides the exclusive patent rights in favour of public interest or federal need.
  • 35 U.S.C. § 203 – March-in Rights (Bayh-Dole Act, 1980)[58] [59] – This provision is deemed to be the closest formal mechanism to compulsory licensing. It grants the government the right to license out federally funded inventions if the patent holder has failed to achieve practical applications, public health/safety needs, public use requirements, or grants an exclusive license to an entity that does not manufacture substantially in the U.S., or the licensee breaches that obligation.[60]

Case Laws

University of Rochester v. G.D. Searle & Co. case (69 U.S.P.Q.2d 1996, Fed. Cir. 2004)

In this case the University of Rochester had patented a method to block an enzyme that was causing inflammation (COX-2).  A company, Pfizer was selling COX-2 inhibitors such as Celebrex and Bextra, which are the drugs that operates on the same mechanism described in the patent of the University of Rochester. [62]

The University obtained the permission to patent and subsequently filed a lawsuit on Pfizer for patent infringement. They contended that Pfizer was using their method without permission and therefore demanded compensation and an injunction.

Pfizer argued that the University did not include any information about a specific drug or invention in their application instead only the method was mentioned.

It was finally decided that Pfizer did not embark in patent infringement as the University failed to follow the proper patenting procedures. [63][64]

Recent Developments

COMPULSORY LICENSE OF PATENTS IN JAPAN

A compulsory license in Japan is a legal mechanism under the Japanese Patent Act that allows a third party to use a patented invention without the consent of the patent holder under specific conditions, balancing patent rights with public interest.

Legal Provisions

Article 83[69] – Non-Working Patents: If the patent has been filed in a span of 3-4 years and is not “worked” (i.e., put to use), any individual has the authority to request a non-exclusive compulsory license after attempting negotiations.

Article 92[70] – Utilization Relationship Between Patents: If a patent holder cannot practice their invention without infringing the rights of others, both the parties may request mutual compulsory licenses, if a mutual agreement is not reached after the negotiations.

Article 93[71] – Public Interest: If a good-faith negotiation fails, an individual can seek permission for a compulsory license for public interest benefits.[72]

Case Laws

Landmark Case: Vision Care Inc. and VC Cell Therapy Inc. (2021)

In this case, Patent No.6518878 covering a method to produce RPE cells from iPS cells was co-owned by Helios Inc., RIKEN, and Osaka University and was exclusively licensed to Sumitomo Pharma.

Dr. Masayo Takahashi, the inventor, left RIKEN to lead Vision Care Inc. (VCCT) to accelerate the implementation. The negotiations between VCCT and Helios failed to reach a mutual agreement. Therefore, a compulsory license was requested under Article 93(2) of the Japanese patent law, and the application also focused on the aspect of public interest. The Japan Patent Office (JPO) provisionally supported the request but encouraged voluntary discussions.

It was also stated that Sumitomo had failed to follow the required process. Finally, a decision was reached wherein VCCT would gain the right to use the patent for non-insurance-based treatments with autologous iPS cells, and the patent owners agreed not to enforce certain rights under specified conditions.

Though no formal license was granted, the threat of one helped secure access.[74]

CONCLUSION

To conclude, each country aims to strike a balance between public interest and patent rights. India and Japan have poignant and well-defined rules on compulsory licensing with a strong focus on medicines, whereas the EU faces legal fragmentation and the US relies on alternative tools. Stronger global cooperation and alignment are required to ensure equal access of the information.

Author: Ishika Sarah Koshy , REVA University, Bangalore

Please contact us at info@origiin.com to know more about our services (Patent, Trademark, Copyright, Contract, IP Licensing, M&A of companies)

Subscribe to YouTube Channel HERE

Join LinkedIn Group: Innovation & IPR

WhatsApp: +91 74838 06607 

Home

Menu

Contact