Compulsory Licensing under Indian Patent Law

The Indian Patent Act, 1970, states that the patents are granted in India to encourage inventions and secure that the inventions are worked in India. The protection and enforcement of patent rights should contribute to the promotion of technological innovation, and to the transfer and dissemination of technology to the mutual advantage of producers and users of technological knowledge, and in a manner conducive to social and economic welfare.

Under these premises, if a patent holder has not worked his invention in India for three years after the grant of patent, any person interested can make an application to the Controller, for grant of compulsory license on the following grounds that;

  1. reasonable requirement of public with respect to the patented invention have not been met,
  2. the patented invention is not available to the public at a reasonably affordable price, or
  3. that the patented invention is not worked in the territory of India.

If the Controller is satisfied that that any of the above is not met, he may order the patent holder to grant a license upon such terms as he may deem fit. However, while making this decision the Controller also has to take in to consideration the following facts.

  • the nature of the invention, the time which has passed since the patent was granted and the measures taken by the patent holder or any licensee to make full use of the invention;
  • whether the applicant (for compulsory license) would be able to work the invention to the public advantage;
  • if the application were granted, whether the applicant has the capacity to undertake the risk in providing capital and to work the invention; and
  • whether the applicant has made efforts to obtain a license form the patent holder on reasonable terms and conditions and such efforts have not been successful within a reasonable period of time as the Controller deems fit.

The Act provides that Compulsory license may be granted with a view to ensure that the patented inventions are worked in India on a commercial scale, without undue delay and to the fullest extent reasonably possible, while making sure that it does not prejudice the interest of any person working or developing the invention in India, under the protection of a patent.

While settling the terms and conditions of compulsory license, the Controller has the responsibility to ensure that the royalty and other remunerations to the parties entitled, is reasonable with regard to the nature of the invention, expenditure incurred by the patentee in making the invention or in developing it and obtaining a patent and keeping it in force ,and the patented invention is worked to the fullest extent by the person whom the license is granted with reasonable profit to him, and such other relevant factors.

The Patent Act, 1970 also states that the above conditions will not be applicable in case of national emergency or other circumstances of extreme emergency.

Under section 92 of the Indian Patent Act which relates to special provisions for compulsory licenses on notification by Central Government; in case of national emergency or extreme urgency, if the Central government deems fit that it is necessary that a compulsory license may be granted in respect of any patent in force, it may make a declaration to that effect in the Official Gazette. Based on such a notification, the Controller shall grant compulsory license to any interested person and shall endeavor that the articles manufactured based on such license grant is available to public at lowest price, and the patentee shall also derive reasonable benefits.

In case a patentee or a licensee is prevented or hindered from working his invention to its best potential, without a license of a related patent, Section 91 provides a provision that, on application from the patentee or the licensee, Controller can make an order for granting license of the related patent to such applicant, subject to other conditions in the Act.

The first Compulsory license was granted in India to Hyderabad based Natco Pharma for the production of generic version of Bayer’s Nexavar, an anti-cancer agent used in the treatment of liver and kidney cancer. This compulsory license was granted on the premise that the patented invention was not available to the public at a reasonably affordable price as only 2% of the cancer patient population could afford the exorbitant price of 2.8 lakh INR for a month’s treatment; at which Bayer was selling the drug. Also, Bayer was importing the drugs to India, which is another ground on which a compulsory license can be granted. Natco Pharma assured that the drug would be sold for Rs. 8,880/- per month.  It was settled that 6% of the net sales of the drug would be paid to Bayer by Natco Pharma as royalty.

In contemporary times when the global population is fighting the menace of Covid-19 virus and when Indian population is drastically affected by the second wave of the pandemic, the think tanks in India are debating on the options in front of the Indian Government to invoke various provision of Indian Patent Act, including the provisions of compulsory licensing, to meet the demand of affordable covid care vaccine and drugs, to pull India out of this slump.