11/19/2018 COMPULSORY

LICENCE IN
PATENT
INTELLECTUAL PROPERTY
RIGHTS

Submitted by: Rishabh Tiwari

ROLL NO. 18
SEMESTER IX

SUBMITTED TO: DISHA ATRI

ASST. PROFESSOR
INTELLECTUAL PROPERTY RIGHTS

SCHOOL OF LAW
GURU GHASIDAS UNIVERSITY, BILASPUR
 DECLARATION

I, RISHABH TIWARI, Roll Number 18, B.A. LL. B Semester IX of Guru

Ghasidas University do hereby declare that, this project is my original work and
I have not copied this project or any part thereof from any source without due
acknowledgement. I am highly indebted to the authors of the books that I have
referred in my project as well as all the writers of the articles and the owners of
the information taken from website for it. It is only because of their contribution
and proper guidance of my faculty advisor DISHA ATRI, that I was able to
gather light on the subject.

RISHABH TIWARI
Roll No. 18
B.A. LL. B Semester IX

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 CERTIFICATE

I am glad to submit this project report on “COMPULSORY LICENCE IN

PATENTS” as a part of my academic assignment. The project is based on
Research Methodology. Its further studies meaning, sources and methods of
Research Methodology and further discusses the Interview Method. I hope this
would be significant for Academic purposes as well as prove information to all
readers.
Here through I declare that this paper is an original piece of research and all the
borrowed text and ideas have been duly acknowledged.

RISHABH TIWARI FACULTY SIGNATURE:

Roll No. 18
B.A. LL. B Semester IX

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 ACKNOWLEDGEMENT

I would like to express my earnest and deepest gratitude to DISHA ATRI,

Faculty for INTELLECTUAL PROPERTY RIGHTS for giving me this
opportunity to do a project on such a valuable topic of “COMPULSORY
LICENCE UNDER PATENT”. I am grateful for the assistance, guidance and
support that were extended during the course of excellent research. I am also
thankful to the college administration for providing the resource necessary for
the research work. I thank my parents and friends for their moral support and
love throughout my research work and project preparation. Above all I thank the
God Almighty for blessing me with the health and vitality to complete this
project.

RISHABH TIWARI
Roll No. 18
B.A. LL. B Semester IX

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 SYNOPSIS

COMPULSORY LICENCE UNDER PATENT

INTELLECTUAL PROPERTY RIGHTS

1. INTRODUCTION
2. GROUNDS FOR GRANTING COMPULSORY LICENSE
3. REVOCATION OF CL
4. TERMINATION OF CL
5. SPECIAL PROVISIONS FOR THE GRANT OF CL
6. IMPORTANT DISCLOSURE MANDATED BY THE PATENT
OFFICE TO FOLLOW
7. CONCLUSION
8. BIBLIOGRAPHY

SUBMITTED BY SUBMITTED TO
RISHABH TIWARI DISHA ATRI
B.A. LL. b IX SEM ASST. PROFESSOR
ROLL NO. 18 IPR

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 INTRODUCTION

Compulsory licenses are generally defined as "authorizations permitting a third

party to make, use, or sell a patented invention without the patent owner's
consent." Under Indian Patent Act, 1970, the provision with regard to compulsory
licensing is specifically given under Chapter XVI. The conditions which need to
be fulfilled in order for a compulsory license to be granted are laid down under
Sections 84 and 92 of the Act. As per Section 84, any person who is interested or
already the holder of the license under the patent can make a request to the
Controller for grant of Compulsory License on patent after three years from the
date of grant of that patent on the existence of conditions mentioned in the Section
84 of the Patents Act, 1970. While granting the compulsory license, the Patent
office will consider few measures such as the nature of the invention, any
measures already taken by the patentees or any licensee to make full use of the
invention, ability of the applicant to work the invention to the public advantage
and time elapsed since the grant of the patent i.e. worked or not worked.
Compulsory licences are in essence, government authorizations which allow a
third party to make, use, or sell a patented product without the consent of the
patent owner. Provisions regarding compulsory licensing are provided for under
both the Indian Patent Act, 1970, as well as the TRIPS (Trade Related aspects of
Intellectual Property Rights) Agreement in the international level. Compulsory
licences are granted for a variety of reasons such as prevention of abuse of the
patent to form a monopoly, addressing public health concerns, etc.

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 GROUNDS FOR GRANTING COMPULSORY LICENSE

The section 84 (1) of the Indian patents act, 1970 states the conditions for
compulsory licensing as follows:

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.

The grounds for granting compulsory license (CL) is explained in the context of
the first compulsory license case in India which is popularly referred to as
the Bayer vs Natco case (The CL was granted in the favor of Natco
pharmaceuticals based in India against Bayer pharmaceuticals based in the US of
A.) for the anti-cancer drug Nexavar.

The reasonable requirements of the public with respect to patented invention

have not been satisfied: Bayer pharmaceuticals is believed to have admitted that
the controller found only 2% of the total number of cancer patients (Kidney and
liver for which Nexavar is used) had an access to the drug.

The patented invention is not available to the public at a reasonably

affordable price: The drug was found to have been sold at a whooping price of
2.8 lakh INR (for a month-long therapy). It was concluded that many patients did
not intend to procure this drug purely due to the pricing issues.

The patented invention is not worked in the territory of India: This means
that the drug should be manufactured to a reasonable extent in India and mere
importation of the drug within the Indian Territory does not amount to sufficient
working. (Since majority of India’s drug market is based on importation of drugs,
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though this clause was weak but with the combination of the earlier two clauses
satisfied the need for compulsory licensing of Nexavar).

If the patentee is able to prove that the reasons for not working the invention
adequately was justifiable, then the grounds may not be applicable for the grant
of CL. Upon the grant of CL an existing license on the patent may be revoked or
amended into a CL.

An important clause which is to be considered for issuing CL is the royalty aspect.

It is highly essential that the commercial rights of the patentee are not
compromised. The onus lies on the patentee to submit necessary evidence
regarding the expenditure incurred in making the invention, developing it,
obtaining a patent, and its maintenance. This entitles the patentee for adequate
royalty upon a CL been issued to the product. Further, it is equally important for
the controller to ensure that the applicant who gets the compulsory license is able
to work the invention to the fullest extent i.e. justify the ground on which the CL
was given to the patent.

Revocation of CL: The revocation of a CL may be done by the controller as per

the section 89 of the Indian patents act, 1970 on the grounds of non-working of
the invention. But, after having worked the invention for a minimum of twelve-
month period if the licensee feels that the grounds on which the CL was granted
needs an amendment, then an appeal regarding the same may be put forth to the
controller for revising the terms for better working of the invention.

Termination of CL: The CL once granted is liable for termination under sec 94
of the Indian patents act, 1970 provided the controller is convinced that the
conditions which were taken into consideration to issue CL no longer exist and
the possibilities of recurrence of such contingencies are bleak or unlikely. While
terminating the CL it is essential for the controller to take into consideration that
the interest of the license holder is not compromised. Also, the CL holder has the
right to appeal against the application for termination of CL.

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Special provisions for the grant of CL:
Section 92 of the Indian patent act, refers to special provision for compulsory
license upon notification by the central government. The three clauses considered
for the same are:
1. When a circumstance of national emergency arises.
2. When in a state of extreme urgency.
3. When there is a case of public non-commercial use.
The most common example for the above-mentioned clauses are cases of
epidemics or health crisis like AIDS /HIV which grip a nation. During these times
it becomes highly essential for the government to procure, disseminate and store
the essential drugs. It requires negotiations with the branded drug manufacturers
of the required drugs to permit the generic manufacturers to manufacture the same
(non-commercial use). In such cases the central government comes into action
for catering to immediate requirement of the nation.

Similarly, section 92-A of the Indian patents act, 1970 grants CL for export of
patented pharmaceutical products in certain exceptional circumstances where a
country has very little or no manufacturing capacity of a pharmaceutical product
to address the requirement of their public then, upon a notification by such
country the required pharmaceutical product may be allowed to be imported from
India on the orders of the controller.

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Advantages of CL:
1. Developing or under developed nations have serious affordability issues
among their population, thus issue of CL would may act as a facilitator of
regulated drug prices.
2. Sometimes, the patentee would not work on the invention sufficiently and
completely. This does not allow the invention to reach the population to
the fullest extent. CL acts as a check and balance in such cases.
3. Contingencies are well handled by the countries due to the CL provision,
thus ensuring adequate supply to the affected population.
4. The growth of generic drugs can be attributed to CL.
5. It has brought the world on a single platform where the nations can render
a helping hand to each other in the time of need through the provisions of
CL.

On the contrary, CL comes with its own snag:

1. Normally when a nation issues CL, it reflects on its ease to accommodate
foreign investors and leads to a notion that the nation is non-patent friendly.
2. The above point may have a cumulative effect on the investment
opportunities.
3. Normally the countries issuing CL are believed to be weak in their IP
regime as they frame their laws favouring themselves.
4. Discouragement of research and development has been a long-standing
argument against CL as research needs investment opportunities.
5. Patentee whose product has been issued CL is dissatisfied when it comes
to royalties as they can never be compared to the expenditure incurred by
in making the invention, developing it, obtaining a patent and its
maintenance.
6. CL transfers the lead from the branded manufacturer to the generic
manufacturer thus leading to price wars amongst the generic
manufacturers.
Innovation is the lifeline of patents. Encouragement to innovate and advocating
research and development are needed for growth and development of an
individual, a country, and the world in whole. With growth and development
come loads of challenges especially when it comes to research, development, and
pricing of the inventions. Though compulsory licenses are believed to
compromise exclusive ownership but, they act as a barricade against monopoly
rights. It should be kept in mind that though the compulsory licenses may be
issued but they should not act as a deterrent to growth and development.
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IMPORTANT DISCLOSURE MANDATED BY THE PATENT OFFICE
TO FOLLOW:
In reviewing the compulsory license case, there is one more section which is very
important for the CL in India. Section 146(2) of the Patents Act, 1970 read with
Rule 131 of the Patent Rules, 2003 compels every patentee and her licensee to
make an annual disclosure as to how far and to what extent they have
commercially worked their patent6. In this respect recently, Delhi High Court
issued notice to the Government of India in a PIL (Public Interest Litigation) filed
by the petitioner7. This notice has been issued because most of the major pharma
MNC's routinely violate patent working norms and the Indian Patent office has
not taken any step in violating such norms to these companies. Before going
further, there is a need to understand how section 146 related to the compulsory
license. As per section 146(2) of the Patents Act, 1970 every patentee and her
licensee have to make an annual disclosure as to how far and to what extent they
have commercially worked their patent in India or abroad.
SECTION 146: POWER OF CONTROLLER TO CALL FOR
INFORMATION FROM PATENTEES

(1) The Controller may, at any time during the continuance of the patent, by
notice in writing, require a patentee or a licensee, exclusive or otherwise, to
furnish to him within two months from the date of such notice or within such
further time as the Controller may allow, such information or such periodical
statements as to the extent to which the patented invention has been commercially
worked in India as may be specified in the notice.
(2) Without prejudice to the provisions of sub-section (1), every patentee and
every licensee (whether exclusive or otherwise) shall furnish in such manner and
form and at such intervals (not being less than six months) as may be prescribed
statements as to the extent to which the patented invention has been worked on a
commercial scale in India.
(3) The Controller may publish the information received by him under subsection
(1) or sub-section (2) in such manner as may be prescribed.

In our Patent laws section 146 i.e. working statement plays an important role at
the time of compulsory licensing cases. With the help of working statement
[which are required to be filed before the expiration of 31st March of every year]
the details provided by the Patentee or their licensee one can estimate whether the
patentee has fulfilled the reasonable requirements of the public by inter
alia selling the patented product at an affordable price or at higher price violating
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the section 84 (1)(b) of the Patents Act. This information played a critical role in
the Lee Pharma Ltd. Versus AstraZeneca and Bayer vs. Natco compulsory
licensing dispute, where these details helped the Controller in getting the decision
related to grant or rejection of Compulsory license when applied. In the first grant
of CL application, Natco obtained the details from the working statement filed by
the Bayer that its super expensive patented drug for kidney/liver cancer was
reaching just about 2% of the patient population and sold at a very high price
violating the section 84 norms of the Patents Act.

In this way, if the patentee fails to fulfil this important statutory information, the
penalty in the form of compulsory licensing and revocation of Patent will come
and this will take such companies in loss of Patent and also it is impossible to
determine whether a patentee has satisfied the reasonable requirements of the
public, an important precondition for compulsory licensing in India.

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 CONCLUSION

It is believed that this era will bring more challenges in terms of grant/ rejection
of CL for more patented drugs. More rivalry is yet to be seen between Indian
pharma giants and larger MNCs. The functioning of Indian Patent office in
dealing with CL case will also bring more clarity about the future of CL in India
and the rules prevailed such laws in India.

In the present case, it is to be understood that the Controller has not fully denied
the CL application of Lee pharma rather the Controller has only informed the Lee
pharma that they have not made out the prima facie case for the order under
Section 84. As per the notice issued by the Controller, under Rule 97 (1), Lee
pharma has one month from the date of notification to request for the hearing, if
it wants to proceed with the application and if request for hearing is not made,
Controller shall refuse the application.

Now it's time to watch how Lee Pharma prepare them for Grant of India's 2nd
CL, the Controller's final decision in grant or rejection of such compulsory license
and the impact of petition filed in respect of non-submission of working statement
details to those companies who are not following the proper submission of
working disclosures.

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 BIBLIOGRAPHY
1. http://www.iprlawindia.org.
2. A K Kaul, Law of Intellectual Property Rights in Prospect & Retrospect,
Published by University of Delhi, First Ed.2001.
3. Dr B LWadehra, Law relating to Intellectual Property Patents, TM,
Copyright, Design, Geographical Indications, Semi-Conductor, Integrated
Circuits Lay out Design Publishing Company Pvt.Ltd. Delhi.
4. Dr.S.R.Myneni, Law of Intellectual Property, Published by Asia Law
House, Hyderabad, Second Ed.2003.
5. http://www.investopedia.com.
6. http://www.indiankanoon.org/doc/864375
7. http://www.findarticles.com/p/articles/mi_qa3791/is_200307/
ai_n9259838/
8. http://www.wto.org/english//dda_e/draft_text_gc_dg_31
july04_e.htm#invest_comp_gpa.
9. http://www.unctad.org/Templates/Page.asp?intItemID=4106&lang=1.
10.http://www.indlaw.com/display.aspx?4674
11.http://www.wipo.intedocs/mdocs/tk/en/wipo_unhchr_ip_pnl_98/wipo_un
hchr_ip_pnl_98_1 .pdf
12.http://www.germanlawjournal.com/ index.php? pageID=11 & art ID=1505
13.http://www.bu.edu/law/central/jd/organizations/journals/international/vol
ume21n2/325-372.pdf.
14.http://www.ipab.tn.nic.in/045-2013.htm
15.http://www. wto.org /english/tratop_e/dda_e/dda_e.htm
16.http://gujarathighcourt.

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