19 Dec
2019

Dealing with compulsory licensing in India

Rahul Chaudhry & Partners

What is a compulsory licence?

A compulsory licence is a licence or authorisation issued by the government to an applicant for making, using and selling a patented product or employing a patented process without the consent of the patentee. Chapter XVI of the Indian Patents Act 1970 and the Agreement on Trade-Related Aspects of Intellectual Property Rights discuss compulsory licensing.

Who can apply for a compulsory licence?

According to Section 84 of the Patents Act, any person interested (regardless of whether they hold a licence for the patent or any other patent) may make an application to the controller for grant of a compulsory licence on expiry of three years from the date of the grant of the patent, when any of the following conditions are fulfilled:

  • reasonable requirements of the public with respect to the patented invention have not been satisfied;
  • the patented invention is not available to the public at a reasonably affordable price; or
  • the patented invention is not used in India.

An interested party may file the application for a compulsory licence online or on paper via Form 17, along with a prescribed fee, with the Indian patent office. Form 17 should be accompanied with a statement setting out the nature of the applicant’s interest, together with the facts and particulars on which the application is based.

Procedure for processing compulsory licence application

On filing the application for grant of a compulsory licence along with the relevant facts and evidence, the controller will analyse the prima facie case made by the applicant against the patentee. After considering such factors as the nature of the invention, the applicant’s ability to work the invention and whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and, if such efforts have not been successful within a reasonable period (ie, six months from the date of application), the controller will decide whether to grant or reject the compulsory licence.

In case the controller is not satisfied with the applicant’s request, a notice will be issued to the applicant regarding rejection of the grant of a compulsory licence. In this scenario, the applicant may request a hearing with the controller, within one month from the date of such notice of rejection. The controller will thereafter decide the fate of the application based on the hearing discussion held with the applicant.

Terms and conditions of a compulsory licence

Once the controller decides to grant the compulsory licence, they will set out the necessary terms and conditions of the compulsory licence. The controller also decides on the royalties or remuneration payable to the patentee based on:

  • the patentee’s investment in the invention;
  • the workability of the patentee’s invention by the applicant;
  • the selling price of the patented articles (at affordable prices); and
  • the term of the licence.

The controller will also clarify the provisions applicable for exporting and importing the patented article, non-exclusivity and non-assignability of the licence, among other things.

The government may, if it is necessary to do so in the public interest, direct the controller at any time to authorise any licensee in respect of a patent to import the patented article or an article or substance made by a patented process from abroad. Such authorisation is subject to conditions, including details of royalties and other remuneration, the quantum of import, sale price of the imported article and import period, among other things.

Opposition to the grant of a compulsory licence

When the controller is satisfied, on consideration of an application under Section 84, that a prima facie case has been made out for the making of an order, the applicant will be directed to serve copies of the application to the patentee and any other person appearing from the register (eg, a licensee mentioned in the register). The application made by the applicant is thereafter published in the Official Journal.

The patentee or any other person desiring to oppose the application for the grant of a compulsory licence may, within the prescribed time (two months from the date of publishing the application in the Official Journal), file a notice of opposition via Form 14, along with the prescribed fee. The opposition statement should contain statements pertaining to the grounds on which the grant of the compulsory licence is opposed. When such a notice is served, the controller will notify the applicant and give both the applicant and opponent an opportunity to be heard before deciding the case.

Licensing of related patents

Where the licensee is unable to work the licensed invention without the use of another related patented invention, the licensee may apply for a grant of licence for such a related patented invention.

Such an order to grant the licence for the other related invention will be made if the controller is satisfied that:

  • the applicant is able and willing to grant or procure a grant for the patentee and its licensee (if they so desire) of a licence in respect of the other invention; and
  • the invention has made a substantial contribution to the establishment or development of commercial or industrial activities in India.

Compulsory licence for exporting patented products

A compulsory licence for exporting goods usually relates to exporting pharmaceutical products, particularly in certain exceptional circumstances. A compulsory licence is available for the manufacture and export of patented pharmaceutical products to any country with insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product, to address public health problems. Such export is allowed, provided that the compulsory licence has been granted by such country or such country has, by notification or otherwise, allowed the import of the patented pharmaceutical products from India. The pharmaceutical products may be any patented product or product manufactured through a patented process of the pharmaceutical sector needed to address public health problems and should be inclusive of ingredients necessary for their manufacture and diagnostic kits required for their use.

On receiving an application in the prescribed manner, the controller will grant a compulsory licence solely for manufacture and export of the concerned pharmaceutical product to such country under the terms and conditions as may be specified and published.

Termination of compulsory licence

On an application (via Form 21) along with evidence, made by the patentee or any other person deriving title or interest in the patent, the compulsory licence granted under Section 84 may be terminated by the controller when the circumstances considered for grant of the compulsory licence cease to exist. The applicant is thereafter required to serve a copy of the application and evidence to the holder of the compulsory licence and to inform the controller of the date on which the service was made effective.

The holder of the compulsory licence may file his or her objection along with evidence to the application for termination, within one month from the date of the controller’s receipt of the application (and evidence). A copy of the objection and evidence is also required to be served to the applicant by the licence holder.

Thereafter, the controller will appoint a hearing for analysing the facts and issuing a verdict. If the controller decides to terminate the compulsory licence, an order setting out terms and conditions (if any) of such termination will be served to both the parties.

Cases

Bayer v Natco

India’s first ever compulsory licence was granted by the Patent Office on 9 March 2012 to Hyderabad-based Natco Pharma for the production of a generic version of Bayer’s Nexavar, an anti-cancer agent used in the treatment of liver and kidney cancer. It was established in Bayer v Natco that only 2% of the cancer patient population had easy access to the drug and that the drug was being sold by Bayer at the exorbitant price of Rs280,000 for a month’s treatment. Further, on the grounds that Nexavar was being imported within India, the Patent Office issued a compulsory licence to Natco Pharma, which assured that the tablets would be sold for Rs8,880 per month. It was settled that 6% of the net selling price of the drug would be paid to Bayer by Natco Pharma as royalties.

BDR Pharmaceuticals International Pvt Ltd v Bristol-Myers Squibb Co

In BDR Pharmaceuticals the controller rejected BDR’s application for a compulsory licence (4 March 2013) for the Bristol-Myers Squibb cancer drug SPRYCEL. The controller rejected the compulsory licence application made by BDR by stating that BDR had failed to make a prima facie case for the grant of the compulsory licence. The controller observed that BDR had made no credible attempt to procure a licence from the patent holder and the applicant had also not acquired the ability to work the invention to public advantage. Thus, the request for grant of the compulsory licence was refused.

Lee Pharma v AstraZeneca AB

In the most recent case of compulsory licensing in India, Lee Pharma, a Hyderabad-based Indian pharma company, filed an application for a compulsory licence (29 June 2015) for the patent covering AstraZeneca’s diabetes management drug Saxagliptin. In order to make a prima facie case, Lee Pharma declared that request for a licence with the patent owner was not responded to within a reasonable period. The grounds alleged by Lee Pharma were that:

  • the patentee failed to meet the reasonable requirements of the public;
  • the patented invention is unavailable to the public at a reasonably affordable price; and
  • the patented invention is not used in India.

However, all three grounds as well as the compulsory application were rejected. The application was rejected on the basis that Lee Pharma failed to demonstrate the reasonable requirement of the public and further failed to demonstrate the comparative requirement of Saxagliptin in relation to other drugs in the market. Further, the controller held that all the related drugs available in the market were in the same price range and the allegation that Saxagliptin alone was being sold at an unaffordable price was not justified. The controller also stated that Lee Pharma failed to demonstrate the exact number of patients that were unable to obtain the drug due to its non-availability.

Rahul Chaudhry & Partners

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PHD Rangappa

Principal associate

[email protected]

PHD Rangappa is a principal associate with Rahul Chaudhry & Partners and has 12 years’ experience in IP rights. He graduated in mechanical engineering from Visvesvaraya Technological University, Belgaum and holds an LLB from Bangalore University. He is a registered Indian patent agent and is enrolled with the Bar Council of Karnataka. 

Mr Rangappa handles patent drafting, prosecution, search and analytics, including freedom-to-operate, invalidity, patentability, landscape, opposition and revocation matters in the mechanical engineering domain, which broadly includes, aerospace, hydraulics, heavy engineering, automotive, mining, heating, ventilation and air conditioning, as well as medical devices. He also advises clients on IP matters and due diligence.

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