“The concept compulsory licensing provides a comprehensive regulatory framework for assessing the patented invention and employing them for societal development and using the invention in the public interest at large without any prerequisite condition of approaching the patent holder for his consent”. Needless to say, the concept of patents grants the patent holder monopolistic hold in the market and thereby enjoying large profits from his invention . Granting a Compulsory or non-voluntary licence is based on a specific framework such as unavailability of the patented invention to the public when it is the utmost necessity of the same , unavailability of the patented invention at an affordable price to the public etc . The Trade Related Aspects Of Intellectual property (TRIPS) agreement provides guidelines in cases of Patent right misuse , it also mentions major setbacks arising in concern to the Pharmaceutical industry in case of life saving drugs .
The position of Indian judicial approach has been absolutely clarified in the case of Bayer vs Natco, whereby the public interest is esteemed. Getting a patent in case of pharmaceutical life saving drugs has been a challenging assignment. The provisions of Indian patent act does not discriminate between the pharmaceutical patent and non pharmaceutical subject matter, rather it provides for equal licensing methodology . The constant tussle between the profit driven motive of the patent holder i.e the pharmaceutical company and the welfare oriented approach of the Country to provide easy access to life saving drugs at affordable price, have attracted attention of people.⁰
Keywords: compulsory licensing, Patent, Patent Holder,TRIPS Agreement.
Introduction
The technological advancements, research and development and innovation are constantly increasing the scope of the intellectual property. Intellectual property is the creative work of the human intellect. And, the right to intellectual property is an invisible right to a product of man’s brain, such as a newly invented product, i.e. property of the mind. An intellectual property is at times described as ‘knowledge goods.¹
Protection of these innovations from duplication becomes a tedious task. The concept of patent aids and attempts to provide monetary value to the innovative creation. What is Patent ? It is a concept where the innovator is bestowed with the absolute right of his creation for a limited period whereby he can exclude any third party from accessing the work and thereby the innovator can enjoy the monetary benefits from his work. ²
WIPO mentions a “patent as exclusive right granted by a government for invention which is a product or a process that provides in general a new way of doing something or offers a new technical solution or offers a new technical solution to a problem” ³. But often circumstances arise, that on one side the innovation and enjoying monetary benefits by patent holders is in contravention of mass public interest, in the sense that there is clash between rights of patent holders for profits and on the other side the interest of the citizens at large. Hence in order to protect the interest of the citizens and also ensure the rights of patent holders the concept of compulsory licensing is a breakthrough.
Compulsory licensing is a provision where the government of a country allows the production for use of a patented product without the permission or consent from the patent holder. This concept is enshrined in the TRIPS Agreement of the World Trade Organization and India being the member of WTO has adhered to the provisions of the agreement and is in constant urge for improving the protection of intellectual property related laws in India. India has put forth numerous laws to tackle the challenges in IPR such as The Patent Act 1970 ⁴, The Patent Amendment Act,2023 , the Indian Copyright Act,1957 ⁵ (latest amendment in 2012 ),The Trademark act,1999 (latest amendment in 2019) and the Designs Act,2000. Hence the balance between the patent holder and citizens’ needs ought to be maintained. The concept of compulsory licencing on one side promotes competition in the market, decreases the price of the patented invention and thereby increase the public access to the invention, but on the other side hampers the right of the innovators to seek large monetary benefits out of their inventions and to continue his research and development for further invention .
This concept has gained popularity in the recent past during the Covid-19 pandemic . Whereby the concept of compulsory licensing was practised in getting access to the essential medicines ,vaccines produced by the pharmaceutical companies to tackle the pandemic.
Further we would examine the intricacies of granting the Compulsory(non-voluntary)licence, its benefits and challenges and the international protocol in this regard.
Research methodology
This research paper is of descriptive nature and for deep understanding of the concept of Compulsory licensing secondary sources are taken into account, also sources like websites,journal , commentaries are considered for better understanding of the concept.
Legal framework:-Evolution in the concept of compulsory licencing
Aspects of International Protocol
- TRIPS AGREEMENT:- The Trade Related Aspects of Intellectual Property Agreement encourages competition in the market and tries to establish an international systematisation for patent laws . Article 27 ⁶ of the TRIPS AGREEMENT describes that the use of patent is available to all kinds of invention whether it be of process of innovation of product or the penultimate product in all fields of innovation. Furthermore Article 27(2) grants the members to reject certain innovation from patentability to protect the public interest and public health .The TRIPS AGREEMENT attempt to balance the short term goal of public interest i.e access to the life saving drugs , and the long term goal i.e the research and development by innovation by pharmaceutical companies. Hence there exist certain restrictions on the innovators(patent holders) right .
Article 8 of TRIPS AGREEMENT grants States to stop the wrong use of intellectual property rights or have any adverse impact on the Trade, in relation to protection of public interest.
Article 30 of TRIPS AGREEMENT attempts to provide an exception by giving regards to the right of patent holder provided taking into consideration that rights do not hamper the public interest at large
Article 31 of TRIPS AGREEMENT allows the usage of the knowledge goods without the permission of the patent holder thereby abiding to the provisions enumerated in this article. But Article 31(f) deserves a special mention . This sub clause under the TRIPS AGREEMENT serves an challenging view elaborating , restriction on the scope of benefits from compulsory licence to its member countries only( i.e WTO )and confines the enjoyment of the patented invention within its domestic capacity whereby they are presumed to have effective manufacturing capacity but on the other hand it bounds export of the patented product to other countries and thereby causing prejudice to the countries with minimum or no manufacturing capacity . As more underdeveloped countries or developing countries are concerned in making use of the patented invention due to lack of manufacturing capacity the pertinent aspect failed to be taken into consideration by the TRIPS AGREEMENT .
The TRIPS AGREEMENT have remained in controversy as the developed countries demand more restrictions on the patented invention (eg life saving drugs) and thereby increase the innovation by promoting development in pharmaceutical industries and on the other hand the developing countries seek to relaxation from the provision of TRIPS AGREEMENT so that they are able to access the drugs at an affordable price by engaging their minimum resources.
The Doha Declaration have raised the concern and attempted to resolve the issue regarding export of essential medicines to developing countries
- DOHA DECLARATION:-
The declaration lays down certain framework and rights to the developed and the developing country by addressing their needs for easy access to the essential drugs taken into regards the public health .
The para 6 of the DOHA DECLARATION ⁷ took into consideration the nations unavailability of resources and lack of manufacturing capacity in relation to the production of life saving drugs by the pharmaceutical industry .
The difficulty to apply the concept of compulsory licensing in accordance with the TRIPS AGREEMENT were taken into account by the council authority of TRIPS and instructions were laid to find remedy.
In 2003, the WTO announced its decision to apply paragraph 6 and thereby omitted Article 31(f) of the TRIPS AGREEMENT. This stance allowed the member countries, grant compulsory licence to the pharmaceutical company producing life saving drugs and exports these generic drugs to the underdeveloped countries and also to other countries who establish unavailability of resources and insufficiency in manufacturing capacity in mainly the pharmaceutical sector.
- Aspects of Indian Patent Act 1970:-
The development, liberalisation and increase in export-import from India put forth multiple challenges, on one hand adhering to the WTO TRIPS AGREEMENT and on the other hand safeguarding the public health and interest. Hence in order to satisfy the need of an hour Indian Patent Act 1970, was established as a foundation for patent protection. During this stage of development, India put forth multiple amendments to alter the aspect of patent in the field of technology, medicines,bioscience etc.
The Patent Act also computes for Compulsory licensing. According to Indian Patent Act 1970, Section 84 ⁸ provides us the guidelines for grant of compulsory licence. The section entails that an application can be made by any third person to the authority (in this case the controller ) for grant of licence but only after expiration of three years from receiving patent by the innovator. The application for Compulsory licencing could be made on following grounds:
- Unable to satisfy public need:-On failure of the first basis need of the patented invention to address the public requirements. This can happen if the domestic demands are not satisfied by the manufacturer or the import of the patented invention isn’t enough. Eg in case a company patents a life saving drug developed by R&D , but there exist less or minimum manufacturing capacity of the company to meet the domestic needs then the Compulsory licence to other producers is granted to satisfy the demands .
- Unaffordable prices:- The vital cause of granting compulsory licensing is the unavailability of patented goods at an affordable price. This and most of the cases becomes an absolute ground for granting compulsory license. This keeps the innovator from having monopoly under check.
- Non-function of the patent invention in India:- The third cause for granting compulsory licence is that the patented invention is not available within the territory of India and the patented product innovator refuses to produce the patent invention in Indian territory or refuses to use the invention in India. The importance of this ground is that if the patent holder is not willing to utilise the invention in India, then the other producing entity in India after grant of compulsory licence is willing to productively utilise the product and not indulge in two patent hoarding.
The section 92 ⁹ of the Indian Patent Act 1970 grants the central government power to take immediate action and accelerate the process of compulsory licensing in case of National emergency. Such instances could be natural disasters that endangers the public interest or a pandemic. After declaration of such a national emergency the controller of patents may award compulsory licences and the terms and conditions for granting licence are determined at controllers discretion provided these conditions are fair and reasonable. At times of public health emergency this provision seeks to protect the interest of most vulnerable people by providing access to Compulsory licenced goods at minimum and affordable rate.
Now the question arises to which industries in India a compulsory licence is awarded .
The following industries on application are granted compulsory licence namely (a)alcohol products (b)tobacco manufacturers (c)defence aerospace equipment (d)explosive and safety fuses (e)hazardous chemicals (f) pharmaceuticals industry .
The first case of issuance of compulsory licence in India:-
A constant tussle between right to intellectual property and maintenance of public interest in case of access to life saving drugs. The concept of compulsory licence in case of Indian Patent Act has always been a debatable topic , in creating balance between rights of patent holders and the interest of public health.
Natco Pharma Limited v. Bayer corporation & ORS ¹⁰ (( (2014) 60 PTC 277 (BOM)12)) is considered to be the first case wherein a compulsory licence was issued in India.
This case Bayer corporation had a patent on life saving drug sorafenib sold under the name nexavar at an exorbitant rate. The life saving drug being not accessible by these citizens at an affordable price an application for compulsory licence was made by Natco Pharma to the controller for generic production and the licence was granted. The section 84 being absolutely clear on the grounds of granting compulsory licence namely , where if the drugs are not available within the territory of India and their exist a Monopoly in the imports of the said drugs, furthermore the patented drug being was made available to the citizens at an exorbitant rate of around 2.8 lakhs rupees per month and the generic production of this same life saving drug would cost around 9000 rupees which was at a fair price to the citizens of India . This grant of compulsory licence was made preserving rights of individuals from sectors of the society to access medication at a reasonable and fair price. Hence this ruling represented India being prepared to use the concept of compulsory licensing for public benefit, and the delicate balance of patent holder right to preserve his intellectual property and societal interest to access medication has again come to scrutiny as a result of this judgement.
Another prominent case of Lee Pharma v.Astra Zeneca¹¹ where Lee Pharma applied for Compulsory licence from AstraZeneca for a patented drug ‘saxagliptin’ used in type II diabetes treatment .
The controller observed and stated that the said drug does not fulfill the essential requirement of section 84 of Indian Patent Act to grant compulsory licence. It was submitted from Lee Pharma that the said drug was not manufactured in India and the import of this drug by AstraZeneca increased the cost of the drugs , but the controller observed that their exist substitutes in the market for the drug and also the applicants contention in regards of unaffordability was disregarded and the claim for compulsory licence was rejected.
Challenges in implementing Compulsory Licencing
The superfluous use of compulsory licence is detrimental to the patent holder company and his country’s for long term. Considering the benefits it provides to the citizens for the short term, it compromises the growth , innovation of the company . In the case of Bayer v Natco due to Compulsory licence the patented drug was sold at cheaper rate but the patent holder was provided with only 6% royalty. In these instances the generic producers had to invest minimum on the research and development and are able to access and produce the drugs . This causes the patent holder companies confidence to diminish thereby resulting in them to resist investing in research and development as their monetary benefits and profits are not satisfied . The United States and other developed countries criticize some of the country’s intellectual property rights laws as compulsory license without any prior investment can gain maximum profits . This also creates tension on the international aspects of trade.
Another aspect which also creates an obstacle is the political reasons . In case compulsory licences are issued by the country it hampers the future investments and technology of the country since it would consider the country as uncaring towards its intellectual property rights and it would ultimately worsen their trade relations and resist investors from investing .
Furthermore the main concern which arises, is that when a specific generic company i.e a license is granted compulsory licence for production of certain patented product then some other generic companies also indulge in producing the same patented product which leads to the loss of the country as well as the patentee . The free local supply of patented products may lead the way to the grey market . A grey market is not an illegal market as compared to the black market but it causes serious economic burden on the country.¹²
Criticisms and scope for improvement
The criticisms put forth the various shortcomings of the international aspects as well as country related aspect ad present wide scope and possibilities for its improvements
One of the major problems which arises is that many times the compulsory licence is used as a tool for political stunts and there is a minimum use of compulsory licence for addressing the public needs . This shortcoming leads to a major issue when there is no existence of transparency and ambiguity in grant of licence. There are several recommendations made for the scope of improvement some of them are :
(a) Clear and unambiguous mention of the procedure established for grant of compulsory licence.
(b) Transparent decision making process.
(c)Regulation and strict provision for misuse of licence
(d) Safekeeping the interest of patent holders when public interest is not a concern.
These suggestions could be given a thought when there is thoughtful discussion and through collaborative efforts solutions to the challenges of Compulsory licensing could be sought and take a path forward promoting dual mandate of maximum innovation and minimum breach of public interest.
Conclusion
Compulsory licensing being a complicated topic calls for a careful strategy. When patents cater to Monopoly and excessive pricing of the invention but at the same time it contributes to providing protection to businesses so they are encouraged to produce more new innovative products. It is critical to establish balance which could be derived by looking at models that promotes research and development and also at the same time put across equally strong model for no advancements of monopoly and its ulterior effect on social interest
On the international platform as well there exist wide worry among the representatives of underdeveloped, poor nations that a strong patent legislation would create more obstacles for them to easy access to the life saving medication but on the other hand the developed and technologically advanced nations advance their concern on that if intellectual property rights are not safeguarded it will create more obstacles to access essential medical care.
In order to establish a balance the patent holder , government and the generic producers must engage in an open discussion and collaboration. These collaborative efforts itself will aid in developing a system that will guarantee innovation to patent holders and fair access to life saving drugs and technology which will ultimately help mankind and create a healthy global community.
Title – Compulsory licencing
- V.K.Ahuja, “Law Relating To Intellectual Property Rights” (LexisNexis Third edition 2017); pg1
- V.K.Ahuja, “Law Relating To Intellectual Property Rights” (LexisNexis Third edition 2017)
- World Intellectual Property Organization, available at
https://www.wipo.int/patents/en/, (Last visited on March 16,2025)
- Indian Patent Act, 1970, Act of Parliament, 1970 (India)
- Copyright act
- TRIPS Agreement, Apr 15, 1994, Art 27, Art 8.,Art 30,Article31
- Doha declaration para 6– https://www.wto.org/english/tratop_e/trips_e/par6laws_e.htm
- Patent act section 84– Indian Patent Act, 1970, S.84, No. 39 Acts of Parliament,1970, (India)
- Patent act section 92–Indian Patent Act, 1970, S.92, No. 39 Acts of Parliament,1970, (India)
- Natco vs bayer
- Lee pharma vs AstraZeneca –https://ipindia.gov.in/writereaddata/Portal/News/33_1_2-compulsory-license-application-20jan2016.pdf
- Mondaq–https://www.mondaq.com/india/patent/953332/compulsory-licenses-and-issues-related-to-it