India: Compulsory Licensing - Diluting The Rights Of A Patentee

INTRODUCTION

World Intellectual Property Organization (WIPO) defines patent as:

Grant of a patent implies a statutorily granted monopoly on the use of invention. Setting aside the concern that this invention should not be exploited at the cost of public interest. Once a patent is granted, the patentee is vested with the exclusive rights over his inventions for the period of 20 years.

For the prescribed duration, every single person is excluded from making any use of such patented product without the prior permission and authorization of the patentee. The only exception to this rule is by granting a compulsory license as defined in Chapter XVI of the Indian Patents Act, 1970.

In order to keep a watch on the grant and use of patent, the patentee is required to submit the information related to the working of the patent to the patent office, annually. It is considered to be a disclosure through which it is ensured that the public requirement is being consistently met along with the availability of the adequate quantity.  

These under-explored provisions of the Indian Patent Act have the potential to gain particular relevance in the present time, where the world fights against the Covid-19 pandemic. It will be prudent if patents do not come in the way of cures and affordable access to such cures for Covid-19.

The Indian patent regime has enough flexibility to allow for access to all during such emergency situations. These can be significant for access to diagnostic kits, vaccines and drugs undergoing trials (like Remdesivir), which are covered by the existing patents.

These clauses will not be relevant for any vaccine or drug that is still in the stage of development and for which patent applications are pending, but will again be very significant, once the vaccine comes into existence.

FORM 27 AND COMPULSORY LICENSING

Compulsory Licenses are authorizations granted to a third-party by the Controller General to make or sell a particular product by use of the patented technology without the need of the permission of the patent owner.

The concept of compulsory licensing can be expressly mentioned in both Indian Patents Act and TRIPS Agreement. For the compulsory License to be granted the pre-requisites envisaged in Sections 84-92 of the Indian Patent Act, 1970 (hereinafter referred to as "the Act") must be complied with.

As per Section 84, any person (irrespective of whether he is the holder of the patent or not), can make a request to the Controller for grant of compulsory license on expiry of three years, from the date of grant of patent, when any of the following conditions is fulfilled:

1. The invention has a reasonable nexus with the public interest. The patented invention can reasonably satisfy the pubic requirement. Thus, serving the greater good.
2. The invention is not available to the public at a reasonable affordable price.
3. The patented invention is not worked in the territory of India.

Factors like nature of invention, the capability of the Applicant to use the patented invention for serving the public benefit are taken into account by the Controller for granting of a Compulsory License.

The Controller is also vested with the right to issue compulsory licensing suo moto under Section 92 of the Act pursuant to the notification issued by the Government if there is either a 'national emergency' or 'extreme urgency' or in case of 'Public non-commercial use'.

The usual pre-requisites to be proved under Section 84 are not applicable under Section 92. The right to be heard of the patentee can be waived off by the Controller during the times of national emergency or any circumstance of extreme emergency. The Act also says that such exceptional circumstances can include "public health crisis" relating to AIDS, TB, malaria or other epidemics. Therefore, a pandemic like Covid-19 directly creates a situation where in the Indian government can exercise its power under Section 92 of the Act.

With the grant of compulsory license to the Applicant, certain privileges are still left with the patentee namely; the rights over the patent including a right to be paid for the copies of the product made under the compulsory license.

Patent Act envisages another circumstance wherein the Indian Government can revoke a patent. Under Section 66 of the Act, the circumstance "generally prejudicial to the public" can lead to revocation of the patent. The revocation of patent in the case of Section 64 is different as stipulated in Section 66.

Revocation under Section 64 brings in inherent strength or weakness of the patent. For a usual revocation, inter-alia, lack of novelty, inventive step and industrial applicability is required to be proven. However, for the revocation under Section 66, the element of public interest and what qualifies as prejudicial to the public comes into play. Revocation under Sections 66 and 64 is different from Section 92.

Section 92 allows the patent to live and also gives benefits to the patentee (by way of royalties) and the compulsory licensees. The existence of such provisions under the Patent Act, will probably alert the patentees. The patent holders can then be influenced to take measures which can probably avoid the fate of their patent being revoked or granted as Compulsory License to the third party.

The measures which can be adopted by the patent holders are as follows:

1. Offer adequate supplies at affordable rates.
2. Ensure that supplies are met through their own efforts as well as the efforts of their own licensees.
3. Enter into licensing contracts of reasonable terms.
4. Show and conduct effective public relations exercise, their actions should reflect their intention that in dire times, they care more about people than excessive profits. 

However, the developing companies have been opposing the grant of compulsory licensing, to protect the interest of global pharmaceutical companies.

GRANTING OF COMPULSORY LICENSE ON EXPORTING PATENT PRODUCTS

A Compulsory License is available for the manufacture and export of patented pharmaceutical products to any country with insufficient or no manufacturing capacity in the pharmaceutical sector, to address public health problems.

Such export is allowed, provided that the compulsory licence has been granted by such importing country or such country has, by notification or otherwise, allowed the import of the patented pharmaceutical products from India.

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 COMPLUSORY LICENSING

When the circumstances under which the compulsory license was granted ceases to exist, the Compulsory License granted under Section 84 can be revoked. On an application (via Form 21) along with the evidence, made by the patentee or any other person deriving interest in that patent can seek for revocation of Compulsory License granted. 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 issuance of his decision. If the Controller decides to terminate the compulsory licence, an order setting out terms and conditions, if any of such termination, will be served upon both the parties.

CONCLUSION

Compulsory licensing is a ray of hope for the financially challenged patients in the underdeveloped countries. Owing to the economic conditions and sub-standard medical facilities provided in India, the provision for Compulsory Licensing acts as a diluting the rights of the patent holders. The real challenge is to comply with the standards of IP protection and at the same time balance the interest of public health.