2.

4 COMPULSORY LICENSING UNDER INDIAN PATENT LAW

I. Introduction

A patent grants inventors exclusive rights to their inventions. This exclusivity enables the
patent holder to control the production, use, and sale of their invention for a specific period,
typically 20 years in India. Such protection incentivizes invention by allowing inventors to
profit from their inventions. However, this right is not absolute.

The doctrine of compulsory licensing balances the monopoly granted to a patent holder with
the larger public interest. In situations where the public welfare is at risk—such as during health
crises, shortages of essential goods, or excessive pricing—the government may intervene to
grant a compulsory license. A compulsory license permits a third party to produce, use, or sell
a patented invention without the consent of the patent holder, subject to conditions that ensure
fairness to both parties. In India, this mechanism is primarily governed by the Patents Act,
1970, specifically under Chapter XVI.

II. Relevant Provisions Under the Indian Patents Act, 1970

1. Chapter XVI (Sections 84-92A)

The Indian Patents Act, 1970, includes a well-structured framework for compulsory licensing
under Chapter XVI, particularly in Sections 84-92A. These provisions seek to ensure that
patents do not hinder the accessibility of critical technologies or medicines to the public,
especially when the patent owner fails to meet certain public-interest standards.

2. Section 84: Grounds for Compulsory Licensing

Section 84 outlines the primary grounds under which any interested party may apply for a
compulsory license after three years from the grant of the patent. The following conditions
must be met:

1. Public Requirements Not Being Satisfied: If the reasonable requirements of the public
with respect to the patented invention are not being met, a compulsory license may be issued.
This could happen if the patent owner is unable to meet public demand for the product.

2. Non-Working of Patent in India: A compulsory license can also be granted if the patented
invention is not being worked in India on a commercial scale, meaning the patent holder is not
adequately manufacturing or distributing the invention domestically. The Indian Patent system
encourages the local working of patents to promote accessibility.

3. Unaffordable Pricing: A compulsory license may be granted if the patented invention is not
available to the public at a reasonably affordable price. This is particularly significant in the
pharmaceutical sector, where exorbitant drug prices can restrict access to life-saving medicines.

3. Section 92A: Export of Patented Pharmaceutical Products

Section 92A specifically addresses the grant of compulsory licenses for the export of patented
pharmaceutical products to countries with insufficient or no manufacturing capacity. The
purpose of this provision is to promote public health on an international scale, especially for
countries in need of critical medicines but unable to produce them domestically. This section
is vital for addressing global health crises, such as pandemics or widespread diseases.

4. Additional Provisions: Sections 92 and 92B

Section 92 allows the government to issue compulsory licenses in situations of national

emergency, extreme urgency, or public non-commercial use. This provision can be invoked
without going through the normal procedure under Section 84. For example, during a
pandemic, this provision could be used to ensure widespread access to vaccines or treatments.

Section 92B allows for the grant of compulsory licenses specifically for export purposes under
certain conditions, aimed at international humanitarian efforts, especially in compliance with
international treaties like TRIPS.
III. Procedure for Obtaining Compulsory License in India

Step 1: Eligibility & Grounds for Filing a Compulsory License Application

Before applying for a compulsory license, an interested party must establish their eligibility
and show that one or more statutory grounds under Section 84 have been met. The following
conditions must be satisfied:

• Eligibility: The application for a compulsory license can only be made three years
after the grant of the patent.

• Grounds for Compulsory Licensing (Section 84(1)):

1. Reasonable requirements of the public are not being satisfied: This means
that the patented product or process is not meeting the demands of the public,
whether due to limited availability or insufficient production.

2. Patented invention is not being worked on a commercial scale in India: The

patented product must be manufactured or used in India. If the patentee is not
utilizing the invention commercially within India, it can form the basis for a
compulsory license.

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

price: If the price of the patented product is too high, making it inaccessible to
the public, the Controller may grant a compulsory license.

4. For pharmaceutical inventions (Section 92A): The license can be requested

if there is a need to export the patented pharmaceutical product to a country with
insufficient manufacturing capacity, particularly in cases of public health
concerns.

Step 2: Application for Compulsory License

Once eligibility is established, the interested party must file an application for a compulsory
license using Form 17 as per the rules laid down by the Indian Patent Rules, 2003.

• Filing of Form 17: This application must be filed with the Controller of Patents and
must include:
 1. Nature of the Applicant’s Interest: The applicant must clearly state their
interest in obtaining the compulsory license, including whether they are a
producer, manufacturer, or user intending to work the invention.

2. Supporting Facts and Particulars: The applicant must provide detailed

reasons, facts, and evidence supporting the need for the compulsory license.
This may include data on public demand for the product, the non-working of
the patent, or price issues.

3. Efforts to Obtain a Voluntary License: The applicant must show evidence that
reasonable attempts have been made to negotiate with the patentee for a
voluntary license on reasonable terms. If such negotiations have failed, this
becomes a strong basis for the compulsory license.

4. Payment of Fees: The prescribed fees for filing Form 17 must be paid at the
time of submitting the application.

Step 3: Controller’s Examination of the Application

Upon receiving the application, the Controller of Patents will assess whether a prima facie
case exists under Section 87.

• Prima Facie Case: The Controller examines whether there is sufficient preliminary
evidence to justify the granting of a compulsory license. This examination involves:

1. Nature of the Invention: Assessing whether the patented invention is of public

importance and whether the patentee’s actions (or inaction) are justifiable.

2. Applicant’s Ability to Work the Invention: The Controller will check if the
applicant has the necessary resources and capability to commercially work the
invention.

3. Efforts Made to Obtain a License from the Patentee: The Controller reviews
whether the applicant has made genuine efforts to obtain a license from the
patentee and whether those efforts were rejected or unreasonably delayed.

Step 4: Notice to the Patentee

If the Controller is satisfied that a prima facie case exists, the next step is to issue a notice to
the patentee under Section 87(1).
 • Notice Period: The patentee and any other interested parties are given a specific time
period (usually two months) to respond to the notice. They may submit
counterarguments or evidence to oppose the grant of the compulsory license.

Step 5: Hearing and Decision

After considering the responses from the patentee and other interested parties, the Controller
holds a formal hearing to give both sides an opportunity to present their cases.

• Hearing Procedure: The applicant and the patentee can present oral and documentary
evidence to support their arguments. The Controller will evaluate all relevant facts,
including the necessity of public access to the invention and the justifications provided
by the patentee for non-working or high pricing.

• Decision by Controller: Based on the submissions and evidence, the Controller will
either grant or reject the compulsory license application. If granted, the Controller
specifies the terms of the license.

Step 6: Determining the Terms and Conditions of the License

If a compulsory license is granted, the Controller must determine the terms and conditions
under Section 90. These terms ensure that both the applicant and the patentee are treated fairly.

• Royalty Payment: The applicant is required to pay a royalty to the patentee. The
amount of royalty is decided based on several factors, including the nature of the
invention, the patentee’s investment in research and development, and the potential
market for the product.

• Scope and Duration of the License: The Controller specifies how long the license will
remain in effect and what actions the licensee is authorized to perform (e.g.,
manufacturing, selling, etc.). The scope of the license must ensure that the public’s
needs are met without overly encroaching on the patentee’s rights.

• Safeguards for the Patentee: Additional conditions may be imposed to protect the
patentee’s interests, ensuring that their rights are not unduly violated.

Step 7: Appeal of the Controller’s Decision

If either party (the applicant or the patentee) is aggrieved by the Controller’s decision, they
have the right to appeal to the Intellectual Property Appellate Board (IPAB) under Section
117A.

• Grounds for Appeal: The appeal may be based on procedural irregularities,

misinterpretation of the law, or dissatisfaction with the terms and conditions imposed
by the Controller.

• Time Limit: The appeal must be filed within the specified time frame, typically within
three months from the date of the Controller’s order.

IV. Relevant Case laws

Natco Pharma Ltd. v. Bayer Corp. (2012)

In 2012, India witnessed its first-ever grant of a compulsory license in the landmark case of
Natco Pharma Ltd. v. Bayer Corporation. Natco Pharma, an Indian pharmaceutical company,
applied for a compulsory license to manufacture and sell a generic version of the cancer drug
Nexavar, patented by Bayer.

The grounds cited for the compulsory license were:

- The drug was priced excessively high, making it unaffordable for most Indian patients.

- Bayer was unable to meet the reasonable requirements of the public.

- The drug was not being sufficiently worked in India.

The Indian Patent Office granted Natco Pharma a compulsory license under Section 84,
allowing it to produce the drug at a significantly lower cost, with a royalty payment of 6% of
the net sales to Bayer.

This case set a precedent for future compulsory license applications, particularly in the
pharmaceutical sector, where affordability and access to life-saving drugs are critical issues.

Lee Pharma v. AstraZeneca AB (2016)

In Lee Pharma v. AstraZeneca AB, Lee Pharma, an Indian pharmaceutical company, applied
for a compulsory license to manufacture and sell a generic version of the diabetes drug
Saxagliptin, patented by AstraZeneca.

Lee Pharma argued that:

- AstraZeneca was not working the patent in India to an adequate extent.

- The drug was not available at an affordable price.

However, in this case, the Indian Patent Office rejected the compulsory license application,
citing insufficient evidence that the public's needs were not being met by AstraZeneca. This
case highlighted the burden of proof on the applicant to demonstrate that the conditions under
Section 84 were indeed fulfilled.
V. International Agreements

The framework for compulsory licensing in India is also shaped by international treaties and
agreements, particularly the TRIPS Agreement and the Doha Declaration, which influence
national patent policies worldwide.

1. TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights)

The TRIPS Agreement, under the World Trade Organization (WTO), provides a global
framework for intellectual property protection, including patents. While TRIPS emphasizes the
need for patent protection, it also recognizes the right of member states to issue compulsory
licenses under certain circumstances.

Article 31 of the TRIPS Agreement allows compulsory licensing provided that:

- It is justified by national emergencies or other urgent circumstances.

- Efforts to negotiate a voluntary license with the patent holder have failed.

- Adequate compensation is paid to the patent holder.

2. Doha Declaration on the TRIPS Agreement and Public Health (2001)

The Doha Declaration reaffirmed the flexibility available to WTO member states under the
TRIPS Agreement to protect public health. It underscored that countries could use compulsory
licensing to ensure access to affordable medicines in the face of public health crises,
particularly in developing countries where access to essential drugs may be limited.

The Declaration allows countries facing public health emergencies, such as epidemics or
pandemics, to issue compulsory licenses without fear of violating international patent rules. It
was a pivotal moment for global health, ensuring that patent laws would not stand in the way
of life-saving treatments for millions of people.