COMPULSORY LICENSE IN LIGHT OF INDIAN PATENT PERSPECTIVE

Introduction

Compulsory license is a self-explaining
word meaning a license agreement under
any compulsion and not by willingness.
The compulsory license can be better
defined as an involuntary license between
a willing licensee and an unwilling
licensor, imposed and enforced by the
controller of patents. Compulsory license
is a very effective legal tool which can
allow the third parties to produce and
manufacture the intellectually protected
product or process at reasonable cheaper
price and at a constant sufficient quantity
through license so that the society does not
remain deprived from any product or have
to pay very high amount for the same.
The compulsory license were introduced
and implemented by many international
arrangements like WTO Agreement on
Trade Related Aspects of Intellectual
Property Rights (TRIPS) and World
Intellectual Property Organization (WIPO)
[1].
Compulsory license and Pharma sector
Till date, healthcare or pharmaceutical
sector is the only sector of interest for the
compulsory license or in other words, it is
the only sector which has the requirement
of compulsory licensing.
As per the survey, during 2001 to 2007,
nearly 52 developing and least developing
countries have allowed compulsory license
for anti-cancer and anti-HIV drugs which
are otherwise priced very high by the
innovator due to patent protection [2]. Very
recently India has also joined the list of

such countries after the grant of first
compulsory license to Natco for producing
Nexavar® (Sorafenib Tosylate) which is
patented by Bayer [3].
When we talk about pharmaceutical
industry, we cannot forget India as India is
one of the largest supplier of
pharmaceutical products all over the globe
and majority of Indian pharmaceutical
organizations are involved in the generic
drugs and Indian Patent Act which includes
the statutory provision of compulsory
license.
Compulsory license provisions in Indian
Patent Act
As per Indian Patent Act, compulsory
license related provisions are covered
under section 84 to section 94.3 [4].
Section 84(1) says at any time after the
expiration of three years from the date of
the grant of a patent, any person interested
may make an application to the Controller
for grant of compulsory license on patent
on any of the following grounds, namely:
(a) that the reasonable requirements of the
public with respect to the patented
invention have not been satisfied, or

(b) that the patented invention is not
available to the public at a reasonably
affordable price, or

(c) that the patented invention is not
worked in the territory of India.
It is crystal clear from above clause that a
very first requirement is expiration of three
years after the grant of patent. The reason

behind it may be to give respect to the
invention and exclusive right to patentee to
get benefit from the exclusive right till
three years from the grant of patent.

Secondly, the third party seeking for
compulsory license can apply for a
compulsory license showing fulfillment of
any of the above three criteria along with
the proper justification and proof to
support the argument. However while
considering any application for
compulsory license, the controller will
look in to many other factors too, like the
ability and capacity of the applicant to
work for the invention in public benefit at
reasonable price and also whether the
applicant has made an efforts to obtain a
license from the patentee on reasonable
terms and conditions and such efforts have
not been successful within a reasonable
period of at least as six months.

As per section 92, if the Central
Government is satisfied, in respect of any
patent in force in circumstances of national
emergency or in circumstances of extreme
urgency or in case of public noncommercial
use, it gives notification in the
official gazette and subsequently on receipt
of the application, compulsory license is
granted as per the terms and conditions as
the controller thinks fit.

In Indian patent act, there is one more
special provision under Section 92-A,
which is meant for the compulsory license
for export of patented pharmaceutical
products in certain exceptional
circumstances. In this case the compulsory
license can be granted to manufacture any

patented product and process in India with
condition that such products is to be
exported to any country having insufficient
or no manufacturing capacity in the
pharmaceutical sector for the concerned
product to address public health problem
provided compulsory license has been
granted by such country or such country
has, by notification or otherwise, allowed
importation of the patented pharmaceutical
products from India.

The very main purpose of the compulsory
license is to prevent the patentee from
abusing intellectual right and to rectify the
unfair trade practice and to consider the
easy availability of the basic health need of
the society at reasonable affordable price.

Indian patent act has inserted certain check
point to prevent abuse of this provision by
the third party by way of possibility of
revision of terms and condition of license
and revocation of license. The controller
can revise the terms and condition after
receipt of an application by any party after
one year of grant of license based on
reevaluation of the factors considered at
the time of granting compulsory license.
The controller can also revoke granted
compulsory license on receipt of an
application any time after two years from
the grant of license by patentee on the
ground that the patented invention has not
been worked in the territory of India or that
reasonable requirements of the public with
respect to the patented invention has not
been satisfied or that the patented
invention is not available to the public at a
reasonably affordable price.

First compulsory license of Indian
patent scenario since 1970: M/s Natco
Vs M/s Bayer: M/s Bayer is patentee
holding compound patent IN215758 which
covers the Sorafenib Tosylate which is
marketed as Nexavar® for the treatment of
hepatocellular carcinoma and renal cell
carcinoma. M/s. Natco applied for
compulsory license of IN215758. Natco
has argued that a) drug was not easily
available to the public based on the Form-
27 filed by M/s Bayer in year 2009 and
2010 b) M/s Bayer was selling Nexavar®
at a price of INR 2,80,000 per month in
India.
After reviewing the application for
compulsory license from M/s Natco in
light of the evidence provided and
justifications, the controller has finally
granted the first compulsory license of
Indian patent history in March 2012 based
on terms and condition from which few are
listed here [5].
• The price of the licensee shall not
exceed Rs.8880 for a pack of 120
tablets.
• The licensee shall manufacture the
drug at his own manufacturing facility
and shall not outsource the
production.
• The license is non-exclusive and nonassignable.
• The licensee shall pay royalty at the
rate of 6% (Later revised to for 7% by
IPAB) of the net sales of the drug on a
quarterly basis.

• The licensee shall supply the drug
covered by the Patent to at least 600
needy and deserving patients per year
free of cost.
• The licensee is solely and exclusively
responsible for its product and for all
associated product liability.
The decision of granting the compulsory
license was welcomed by Indian generic
pharmaceutical industry as one of the
approach to cope up the patent related
hurdles but they have to move over with
caution and as per statutory requirement
laid down in legislation. If not, the road
will end with dead end.
Earlier in January 2013, Department of
Industrial Policy and Promotion (DIPP)
has initiated the thought process of issuing
compulsory licenses for Herceptin®
(Trastuzumab) which is used in the
treatment of breast cancer, Ixempora®
(Ixabepilone) which is used in treatment of
chemotherapy and Sprycel® (Dasatinib)
which is used in treatment of leukaemia
[6]. However as per the recent
development in this matter, the approval
was given only to Sprycel® (Dasatinib)
and remaining two drugs are either under
discussion or rejected for time being form
the consideration of compulsory license.
Interestingly M/s BDR Pharma, a Mumbai
based pharmaceutical company had
applied for compulsory license for
Sprycel® (Dasatinib) in March 2013
before the thought process of DIPP. More
interestingly the compulsory license
application of M/s BDR Pharma has been

rejected by the Controller General and
provided the statement that M/s BDR
Pharma was not successful to establish the
“prima facie” case in support of their
application for compulsory license [7]. As
discussed above regarding provision of
compulsory license, the controller also
considers the reasonable efforts made by
the applicant to obtain voluntary license
from the patentee and in case of M/s BDR
Pharma, the failure to establish this, was
one of the ground reasons for rejection.
Future prospective

Either failure or success, it is a good move
by Indian generic pharmaceutical
companies approaching for compulsory
license and contributing towards the
corporate social responsibility in one or
other way. The effective use of the
provision of compulsory license can
reduce the cost of healthcare products
protected by patent up to affordability of
the public at large for developing and least
developed countries. Compulsory license
application filed by M/s BDR Pharma is a
good example for big Indian generic
companies to think in this direction and
target all anti-cancer and anti-HIV drugs
which are available at a very high cost by
patentee.
References

[1] Overview: the TRIPS Agreement
available at http://www.wto.org/
english /tratop_e/trips_e/intel2_e.
htm#anticompetitive (accessed on 30
Dec 2013).

[2] Compulsory licensing and the anticompetitive
effects of patents for
pharmaceutical products: from a
developing countries’ perspective
available at http://www.idra.it/
garnetpapers/C14A_Kaushik_A_Jak
tar.pdf (accessed on 30 Dec 2013)

[3] India’s First Compulsory License
Granted! available at http://spicyip.
com/2012/03/breaking news-indiasfirst-
compulsory.html (accessed on
30 Dec 2013)

[4] The Patent Act, 1970 as available at
h t t p : / / w w w. i p i n d i a . n i c . i n / i p r /
patent/patent_Act_1970_28012013_
book.pdf (accessed on 30 Dec 2013)

[5] Terms and conditions referred from
the decision of controller available at

http://www.ipindia.nic.in/iponew/co

mpulsory_license_12032012.pdf

[6] Referred from India recommends
compulsory license for anti-cancer
drug available at http://www.
worldipreview.com/news/indiarecommends-
compulsory-licencefor-
anti-cancer-drug (accessed on 30
Dec 2013)

[7] Decision from Indian patent office
available at http://ipindia.nic.in/
iponew/Order_30October2013.pdf.