Licensing without consent

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The sole compulsory licence granted by the Indian patent office has
unsettled innovators. Naveen Varma and Sujit Thakur at ZeusIP
explain the process of compulsory licensing in India

Under the patent laws of several countries, including India, an eligible third party can be granted a compulsory licence to work a patented product or process.

Naveen Varma
Naveen Varma

India’s Patents Act, 1970, as it was originally enacted, provided for compulsory licensing. After 1994 when India signed the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), as mandated by the World Trade Organization, the act was amended three times – in 1999, 2002 and 2005 – to comply with TRIPS.

The Patents (Amendment) Act, 2005, allowed product patents to be granted for drugs, which was not allowed under the 1970 act. After 2005, compulsory licences for pharmaceutical product patents became a possibility.

Scenario in which licence is granted

Under the Patents Act, an applicant can obtain a compulsory licence on the following grounds: (a) the reasonable requirements of the public regarding the patented invention have not been satisfied; or (b) a patented invention is not available to the public at a reasonably affordable price; or (c) a patented invention has not been worked in India.

Accordingly, if even one of the above-mentioned grounds is satisfied, a compulsory licence may be granted.

First compulsory licence

Even though the provision for a compulsory licence has been a part of Indian patent law for a long time, the grounds detailed above were not explored or interpreted until 2011, when an Indian generic drugs manufacturer, Natco Pharma, applied for a licence for a drug patented by Bayer. Natco was granted a compulsory licence by the Controller of Patents in 2012, as it could provide evidence for one or more of the grounds necessary. This landmark compulsory licence generated a lot of buzz globally. The focus was specifically on the non-availability of patented drugs for the general public at an affordable price.

The granting of the compulsory licence reignited debate about patents versus patients in India. The tug-of-war continues between the innovator drug manufacturers, which argue that the pricing of a drug reflects the sums of money they have invested in the research and development necessary to develop the molecules, and patients, who point out that life-saving drugs are increasingly unaffordable.

Sujit Thakur
Sujit Thakur

Public opinion

This landmark case has drawn attention to the patients’ side as the escalating battle between multinational pharmaceutical companies and India’s generic drugs manufacturers hit global headlines.

Aggrieved by the order of the controller, Bayer filed an appeal at the Intellectual Property Appellate Board (IPAB). The IPAB recently upheld the controller’s order and the compulsory licence has been held to be valid.

However, while India has had a compulsory licensing regime for a long time, only a couple of applications for grant of compulsory licence have been filed.

Why so few applicants?

Given that India is a hub for generic drugs manufacturers, the obvious question is: why have so few compulsory licence seeking applications been filed?

A possible answer for this can found in the Patents Act, specifically, in the questions which the patent office considers while reviewing an application. These are:

• What measures have already been taken by the patentee or any licensee to make full use of the patented invention?

• Is the applicant for a compulsory licence capable of working the patented invention to the public advantage?

• If the compulsory licence was to be granted, would the applicant have the capacity to absorb the risk involved in providing adequate capital to work the invention? and

• Has the applicant made any efforts to obtain a licence from the patentee on reasonable terms and conditions?

To obtain a compulsory licence an applicant should be able to answer “yes” to all the above questions.

To conclude, although the provisions for compulsory licensing exist, such a licence would be granted only to an applicant which is capable of using it for meeting the public demand at a reasonable price in India.

This suggests that patentees which consider India as an important market should be ready to sufficiently work the patented invention so as to meet the reasonable requirements of the Indian public at a reasonable price. If a patentee can do this, there is little chance that it will need to face the challenge of a rival that is seeking a compulsory licence.

Naveen Varma and Sujit Thakur are partners at ZeusIP, a Delhi-based IP firm.