A patent is one of the most important forms of Intellectual Property Rights (IPR) and can be defined as a set of exclusive rights granted by the Government or a sovereign state to an inventor or assignee for a limited period in exchange for detailed public disclosure of an invention. Patents are granted to the inventions that are novel, inventive and industrially useful. Additionally, the subject matter shall not fall under category of “Inventions not patentable” and the patent specifications shall fulfil the statutory requirements that describe contents of the specifications and manner, in which a patent application is to be submitted. In order to get a patent, the inventor or applicant has to describe the invention in a prescribed format and submit to respective patent office, and upon thorough due diligence and scrutiny, the patent is granted, provided it fulfils statutory requirements. Once the patent is granted, patent holder or patentee gets right to exclude everyone else from making, using, selling, offering for sale and even importing the product or process that uses patented invention.
Now, when the patent is granted, though, patent holder gets a set of rights to prevent other from using the patented invention, grant of patent comes with a set of duties and obligations. After getting a patent, it becomes duty of the patent holder to work the invention, himself or by means of granting a license to third party (ies) because the sole purpose of having a system of patents is to ensure that the inventions are worked in India on a commercial scale and to the fullest extent without any undue delay and patented product is available to the public. In fact, Section 146 of the Indian Patents Act 1970 requires every patentee to disclose every year, the extent to which he/she has commercially “worked” his/her patent. Additionally, having set of rights in the form of patents should also ensure that patentee is not abusing the rights, especially in case of pharmaceutical patents, where the subject matter claimed a patent, may pertain to a lifesaving drug, it becomes critical to ensure that drug is available at affordable price and sufficient quantity to cater market needs.
The history of compulsory license goes back to the time when Africa was in the grip of HIV/AIDS epidemic and the patents for Anti-Retroviral (ARV) drug combination were in hands of few leading pharmaceutical companies such as Glaxo, Merck and SmithKline etc. ARV is one of the most effective drug combinations to not only suppress the HIV virus and but also stop the progression of HIV disease. As these companies had patents on the drugs, they also had right to prevent all other companies from making, selling, offering for same and importing the drug in the territory of Africa. This kind of exclusivity extended by the patent sometimes results in complete monopoly and abuse of patent rights by the patentee. In this case, these multinational companies were exclusively marketing the drugs at exorbitant prices of $10,000 per patient per year, which was unaffordable for majority of patients.
In the meantime, looking at the opportunity to cater needs of patients, Cipla, an Indian Pharma company offered to manufacture and sell a generic version of the drug at about 3 % of the price. The African Government started to procure the drugs from Cipla mainly because of low price and quality, for which it was sued by drug multinationals for violating their patent rights. One important point to be noted here is that Africa is a country with little or no drug manufacturing capacity and therefore, it had to solely depend upon importing the drug from outside. However, the multinationals in this case were forced to withdraw the suit due to an outrage by the international community.
This incident became an issue in international forums like WHO, UN, UNCAD and WTO Ministerial conference at Doha, Qatar on 14th November 2001. In the fourth Ministerial conference at Doha, the issue of pharmaceutical patent and public interest was taken up and a declaration was made on “TRIPS Agreement and Public Health”. Its purpose was to respond to the concerns that have been expressed that the TRIPS Agreement might make some drugs difficult to obtain for patients in poor countries.
Doha Declaration constituted a milestone in the TRIPS Agreement for two reasons because:
- It ensures balance between public health and patent rights, and
- Sets forth a clear preventive standard
According to Section 83 (General principles applicable to working of patented inventions) of Indian Patents Act 1970, there has been emphasis on “Working of the patents” which means that the patented invention shall be commercialized in order to meet reasonable requirements of the public and patented products are available at reasonable price to the public. Patents are granted to the inventors for the purpose of encouraging inventions as well as to enhance industrial development and, therefore, should be worked in its fullest extent within the territory of India. The patents are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article, but the invention shall be worked commercially to meet demands of the public. The patents granted shall not delay protection of public health and nutrition and should act as instrument to promote public interest, especially in sectors of vital importance for socio-economic and technological development of India. The patent rights should not be abused by the patentee and the patentee shall not resort to practices, which unreasonably restrain trade or adversely affect the international transfer of technology. The patents are granted to make the benefit of the patented invention available at reasonably affordable prices to the public.
if the patentee is not commercializing the invention and because of that, the reasonable requirements of the public are not met or the patented product is not available to public at reasonable price, the compulsory license is available as a remedy against abuse of patent right. The provisions for compulsory licenses are made to prevent the abuse of patent as a monopoly and to make the way for commercial exploitation of the patented invention by an interested person. Compulsory licensing is granted by the Government to produce the patented product or process without the consent of the patent owner. With respect to the pharmaceutical industry, the compulsory license attempts to strike a balance between promoting access to existing drugs and promoting research and development into new drugs.
If the invention is not commercialized for 3 years or in case of national emergency or urgency, the compulsory license may be granted to the person who requests the controller for the same. After thorough assessment of entire situation such as necessity and demand of commercializing the invention, capacity of the applicant to manufacture the patented product or process, the Controller may grant compulsory license. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) also sets out specific provisions that shall be followed if a compulsory license is issued. All significant patent systems comply with the requirements of TRIPs.
Section 84, 92 and 92A are the three main provisions that talk about compulsory license. According to section 84 (Compulsory License) of Indian Patents Act 1970, if patentee doesn’t commercialize the invention for 3 years, any person interested can request the Controller to grant him a compulsory license in order to manufacture and commercialize the patented invention so that reasonable requirements of the public are met and the product is available to the public at reasonable cost. The application for compulsory license under Section-84 can be filed only after expiry of 3 years from the date of grant of the patent.
According to Section 92 (Special provision for compulsory licenses on notifications by Central Government), if the Central Government is satisfied that it is necessary that compulsory licenses should be granted at any time after the sealing of patent to work the invention, it may make a declaration to that effect, by notification in the Official Gazette. The compulsory license under this section is granted under following circumstances:
- National emergency; or
- In circumstances of extreme urgency; or
- In case of public non-commercial use.
The Controller shall grant to the applicant a license under such circumstances on the terms and conditions as he thinks fit. He shall settle the terms and conditions of a license and try to secure that the articles manufactured under the patent shall be available to the public at the lowest prices consistent with the patentees deriving a reasonable advantage from their patent rights. The public health crises may be related to Acquired Immuno Deficiency Syndrome (AIDS), Human Immuno Deficiency Virus (HIV), tuberculosis, malaria or other epidemics.
Section-92A (Compulsory license for export of patented pharmaceutical products in certain exceptional circumstances) was introduced by The Patents (Amendment) Ordinance, 2004 which came into force on 1st January 2005, to provide for grant of compulsory license by the Controller for export of patented pharmaceutical product in certain exceptional circumstances, where compulsory license has been granted by the country to which the export is intended. This provision is introduced to address the public health concerns of the countries having insufficient or no manufacturing capacity in the pharmaceutical sector to implement the decision of the TRIPS council on Para 6 of the Doha Declaration on TRIPS Agreement and Public Health. This section lays down the conditions that are required to be fulfilled, when the compulsory licenses for export purposes will be available. The compulsory license is available only for:
(a) The patented pharmaceutical product;
(b) Manufacture and export to any country having insufficient or no manufacturing capacity in the pharmaceutical sector and
(c) The product addressing the public health problems in such country.
Compulsory license is available for manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems. Such country shall permit importation of the patented pharmaceutical products from India by notification or otherwise. On receipt of an application in the prescribed manner, the Controller shall grant a compulsory license solely for manufacture and export of the concerned pharmaceutical product to such country under such terms and conditions as may be specified and published by him.
The term ‘pharmaceutical products’ used in this section means any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address public health problems and shall be inclusive of ingredients necessary for their manufacture and diagnostic kits required for their use.
Compulsory license once granted under certain circumstances such as national emergency or extreme urgency expires when the circumstances under which it was granted do not exist anymore. While considering an application for termination of compulsory license, the Controller shall take into account that the interest of the person who had been granted the license is not unduly prejudiced.
March 2012 , Indian Patent Office granted its first compulsory license to a domestic generic drug-maker, Natco for anti-cancer drug called Nexavar. German pharmaceutical company Bayer AG had monopoly over an anti-cancer drug, and it authorized the production of a low-cost version for the Indian market. Under Section 84 (1) of the Indian Patent Act 1970, any person may request a compulsory license if, after three years from the date of the grant of a patent, the needs of the public to be covered by the invention have not been satisfied; the invention is not available to the public at an affordable price; or the patented invention is not “worked in,” or manufactured in the country, to the fullest extent possible.
Bayer acquired an importing license for the drug Nexavar (sorafenib tosylate) in 2007 but, according to the Indian Patent Office‘s decision, the Bayer did not begin importing the drug to India in 2008 and only small quantities were available during the following two years. Bayer “took no adequate or reasonable steps to start the working of the invention in the territory of India on a commercial scale and to an adequate extent,” the decision notes. The drug was found to be exorbitantly priced and out of reach of most of the people. ” the patent authority wrote in its 62-page decision. “The product in question is not a luxury item but a lifesaving drug and it is highly important that a substantial part of the demand be met strictly. In the present case, even 1 percent of the public doesn’t derive benefit of the patented drug.[1]”
In its compulsory license request, Indian generic manufacturer Natco proposed selling sorafenib tosylate at Rs. 8,800 per patient per month, approximately US $175, resulting in a 97 percent price cut compared to Nexavar. The Indian Patent Office also said that Natco must pay royalties to Bayer on a quarterly basis at the rate of 6 percent of the net sales of the medicine.
Compulsory license is a kind of permission or license granted by controller of patents with respect to the working of the invention. This is one of the effective remedies to keep drug price under control and ensure that the drug is available to public at affordable price in the territory of India and balance between patent rights and public health is maintained well.
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