Compulsory Licensing under Indian Patent Law

What is a patent A patent is a grant from the government which confers on the patentee for a limited period of time the exclusive privilege of making, selling and using the invention for which a patent has been granted

Purpose of a Patent To enjoy the exclusive rights over the invention. To ensure commercial returns to the inventor for the time and money spend in generating a new product.

What inventions are Patentable In order to be patentable, an invention must pass three tests:- The invention must be “novel” The invention must be Non Obvious The invention must have industrial applicability

Patent protection under Indian Law The Patent Act of 1970 was passed to govern the granting of Patents under Indian Law. To make the Indian Patent Act, 1970 compliant with the Trade Related Aspects of Intellectual Property Law (TRIPS) Agreement the act was amended in the years 1999,2002 and The Patent Act of 1970 was passed to govern the granting of Patents under Indian Law. To make the Indian Patent Act, 1970 compliant with the Trade Related Aspects of Intellectual Property Law (TRIPS) Agreement the act was amended in the years 1999,2002 and 2005.

Salient Features of the Act Provides for two types of Patent:- -) Product Patent -) Process Patent Term of Patent is 20 Years Act provides for both pre and post grant opposition No product patents for substances intended for use as food, drugs and medicines including the product of chemical processes Provision for non-working as ground for compulsory licenses, licenses of right, and revocation of patents Provision for appeal to High Court on certain decisions of the Controller Provides for two types of Patent:- -) Product Patent -) Process Patent Term of Patent is 20 Years Act provides for both pre and post grant opposition No product patents for substances intended for use as food, drugs and medicines including the product of chemical processes Provision for non-working as ground for compulsory licenses, licenses of right, and revocation of patents Provision for appeal to High Court on certain decisions of the Controller

Safeguards under the Act Compulsory license to ensure availability of drugs at reasonable prices Provision to deal with public health emergency Revocation of patent in public interest and also on security considerations

Compulsory Licensing Compulsory Licensing is defined by the WTO as :- “Compulsory licensing is when a government allows someone else to produce the patented product or process without the consent of the patent owner.”

The provisions related to Compulsory License are dealt with Under Chapter XVI of the Patent Act comprising sections 84 to 92 The Patent act allows for grant of Compulsory License for the following two grounds o Abuse of Patent Right o Public Interest The provisions related to Compulsory License are dealt with Under Chapter XVI of the Patent Act comprising sections 84 to 92 The Patent act allows for grant of Compulsory License for the following two grounds o Abuse of Patent Right o Public Interest

Grounds for obtaining a compulsory license Sec. 84 lays down three grounds for grant of a compulsory license:- That the reasonable requirements of the public with respect to the patented invention have not been satisfied. That the patented invention is not available to the public at a reasonably affordable price. That the patented invention is not worked in the territory of India. Sec. 84 lays down three grounds for grant of a compulsory license:- That the reasonable requirements of the public with respect to the patented invention have not been satisfied. That the patented invention is not available to the public at a reasonably affordable price. That the patented invention is not worked in the territory of India.

Application for Obtaining a Compulsory License The Application should be made after three years of grant of Patent. The Application should be made by a “person interested” as defined by Sec 2(t) of the Indian Patents Act :- "person interested" includes a person engaged in, or in promoting, research in the same field as that to which the invention relates; The party applying for compulsory licensing must have sought to obtain a voluntary license from the patentee on reasonable terms and such efforts have not been successful within a reasonable period as per the Controller of Patents.

In Summary Application is made by person interested Having capacity to work the invention on a commercial scale Having sought to obtain a voluntary license on reasonable terms

Procedure for grant of Compulsory License After the hearing, an appeal shall lie to the appellate board from all decisions of the controller within a period of six months After the notice of opposition is filed, the controller shall fix a date for hearing of the case An opportunity shall be given to the patentee or any other person to file opposition to grant of said license. Upon receiving the application the controller determines whether a prima facie case is made out

REASONABLE REQUIREMENTS Sec 84(7) lays down the conditions under which reasonable requirements shall deemed to not have been satisfied if:- (i)The continuance/development of an existing trade/industry or the establishment of a new trade/industry is hampered/prejudiced (ii)The demand for the patented article has not been met to an adequate extent and on reasonable terms. (iii) A market for export of the patented article manufactured in India is not being supplied or developed. Sec 84(7)(a)

By imposition of conditions on license by the patentee, manufacture, use or sale of materials not protected by the patent is prejudiced Section 84(7)(b) a licence is granted under an exclusive grant back condition, such condition shall on its own constitute a situation in which the reasonable requirement of the public shall be deemed to not have been satisfied Section 84(7) (c) the patented invention is not being worked in India on a ‘commercial scale’ Section 84(7)(d) the working of the patented invention on a commercial scale in the territory of India is being prevented or hindered by the importation from abroad of the patented article Section 84(7)(e)

Invention is not reasonably priced The patentee must make invention available to the public at a reasonable price. What is reasonable price depends upon the facts and circumstances of each case. If the price charged is an ‘excessive’ one, it may, in certain circumstances, also amount to an ‘abuse’ of a dominant position under the Competition Act (2002). “Affordable to public is required to be considered as affordable to different sections of the society.” As was held by the Controller:-

Invention is not worked in India It was held by the Controller of Patents in the case of Natco Pharma vs. Bayer Corporation Ltd that working meant “Manufacturing in India to a reasonable extent” It could be argued that the word ‘worked’ could include even importation However Sec 83(b) states that:- “Patents are not granted merely to enable patentees to enjoy monopolies for the importation of the patented article” This would negate any interpretation that one who merely imports the patented product can be said to have worked the invention in the territory of India. The High court of Bombay has however held that mere importation can be classified as working if the patentee can show that local manufacturing was not possible

Terms and Conditions for grant of Compulsory License Sec 90 lays down certain terms and conditions that the controller shall endeavour to secure for the patentee:- that the royalty if any, reserved to the patentee or other person beneficially entitled to the patent, is reasonable. that the patented invention is worked to the fullest extent by the person to whom the licence is granted and with reasonable profit to him. that the patented articles are made available to the public at reasonably affordable prices. that the licence granted is a non-exclusive licence. that the right of the licensee is non-assignable. that the licence is for the balance term of the patent. Sec 90 lays down certain terms and conditions that the controller shall endeavour to secure for the patentee:- that the royalty if any, reserved to the patentee or other person beneficially entitled to the patent, is reasonable. that the patented invention is worked to the fullest extent by the person to whom the licence is granted and with reasonable profit to him. that the patented articles are made available to the public at reasonably affordable prices. that the licence granted is a non-exclusive licence. that the right of the licensee is non-assignable. that the licence is for the balance term of the patent.

Revocation of Compulsory License According to Sec 85 of Indian Patents Act, 1970 After 2 years of grant of Compulsory License any interested person may file an application with the controller to revoke the patent on the following grounds: reasonable requirements of the public with respect to the patented invention has not been satisfied the patented invention is not available to the public at a reasonably affordable price. invention has not been worked in the territory of India The Controller if satisfied, that any of the grounds have been met may pass an order to revoke the patent. According to Sec 85 of Indian Patents Act, 1970 After 2 years of grant of Compulsory License any interested person may file an application with the controller to revoke the patent on the following grounds: reasonable requirements of the public with respect to the patented invention has not been satisfied the patented invention is not available to the public at a reasonably affordable price. invention has not been worked in the territory of India The Controller if satisfied, that any of the grounds have been met may pass an order to revoke the patent.

Compulsory licences on notifications by Central Government Section 92 of the act lays down 3 grounds for which a compulsory license may be granted by the government. They are:- National Emergency Extreme urgency Public Non Commercial Use If the government is satisfied that it is necessary that Compulsory License be granted they may make a declaration by notification in the official gazette. Subsequent to such declaration any interested party may make an application for CL and the same shall be granted as per terms and conditions set by the Controller. In this situation an Interested Party does not have to wait for three years before making said application. Section 92 of the act lays down 3 grounds for which a compulsory license may be granted by the government. They are:- National Emergency Extreme urgency Public Non Commercial Use If the government is satisfied that it is necessary that Compulsory License be granted they may make a declaration by notification in the official gazette. Subsequent to such declaration any interested party may make an application for CL and the same shall be granted as per terms and conditions set by the Controller. In this situation an Interested Party does not have to wait for three years before making said application.

Legal Precedent Natco Pharma Ltd Vs. Bayer Corporation, 2012 in front of the Controller of Patents.

Facts of the Case The Defendant is a corporation incorporated under the laws of United States of America (USA). The petitioner invented and developed its patented drug Nexavar On March 3 rd 2008, the petitioner was granted a patent by the Controller of Patents in India. The Patentee sold the drug in India at Rs2,80,000 per month. On 29 th July 2011, Natco applied to the controller for a compulsory license. Such application came about after Bayer refused to grant a voluntary license when Natco had applied for one in December, By order dated 9 March 2012 of the Controller while granting compulsory licence to Natco to manufacture and sell the patented drug also directed it to pay to the petitioner royalty at 6% of its net sales of the patented drug.

The petitioner appealed the decision in the Appellate Tribunal, where by decision dated 14 th September,2012 the tribunal upheld the decision of the controller. The decision of the Tribunal was Challenged in the High Court of Bombay by way of Writ petition under Art The High court upheld the decisions of the Controller and tribunal and dismissed said appeal

Issue 1 - Reasonable requirements of the public were not satisfied Patentee’s submission:- Bayer argued that sales made by them and CIPLA satisfied reasonable requirements of the public. The patentee argued that sales made by CIPLA should be a factor as if Bayer did succeed in getting an injunction against CIPLA in an infringement suit for Nexavar which was on-going in the Delhi High Court, the sales made by CIPLA would be deemed to be sales made by Bayer for the purpose of ascertaining damages. Thus until a decision was passed in Delhi High Court the presence of CIPLA could not be ignored. Decision The controller did not accept said argument. It was held that it is the duty of the person to whom the patent was granted to satisfy the requirements of the public. It was submitted that when the appellant had issued statements that CIPLA was an infringer and was fully pursuing a civil suit against CIPLA, it is impossible to accept its case that CIPLA’s sales should be taken into account.

Issue 2 -The drug was not available at reasonably affordable price Patentee’s Submissions:- Bayer argued that the cost of R & D and cost of manufacturing must be taken into account while determining reasonably affordable price. The contended that reasonably affordable price should be reasonable to both the patentee and the public. Decision The controller rejected the contention of the patentee and held that the reasonably affordable price is to be decided only with respect to the public and not the patentee

Issue 3 - Invention not worked in territory of India Patentee’s Submissions :- Bayer argued that ‘working in territory’ did not mean manufactured in India. Rather it meant supplied to India. They contended that the words ‘manufactured in India’ were deleted from Sec. 84(7)(a)(ii) during the amendment act of 2002 thus negating the requirement of local manufacture. Decision The court pointed out that the words ‘manufactured in India’ under Sec 84(7)(a)(ii) had referred to a separate ground for granting compulsory License i.e.- Reasonable Requirements. Thus according to the Controller the concept of ‘Manufactured in India’ was removed from the context and made a separate ground for granting CL. The Court held that the term ‘worked in the territory of India’ could not be restricted to ‘worked on a commercial scale’ and had to be interpreted as manufactured in India to a reasonable extent

Order passed by the Controller As the grounds mentioned under Sec 84 were satisfied the controller granted a compulsory License to Natco Pharma Ltd. With the following terms and conditions:- The price of the product was set at Rs per month. The Royalty was set at 6%. However in the consequent appeal royalty was increased to 7% The license is non exclusive The license is non assignable License is for manufacture and sale within territory of India only. The license is for balance term of patent only.

Fin.