ABSTRACT
This article examines the framework and implications of compulsory licensing within the context of the Indian Patent Act of 1970 and the TRIPS Agreement. It explores the criteria under which compulsory licenses can be granted, emphasizing the need to meet public health demands, ensure affordability, and facilitate local manufacturing of patented inventions. Highlighting the Doha Declaration, the article discusses how it reinforces member states’ rights to issue compulsory licenses and the flexibility afforded to developing countries in addressing public health challenges.
A pivotal case study is presented: India’s first compulsory license granted to Natco Pharma for Bayer’s cancer drug, Nexavar, in 2012. The article details how the exorbitant pricing and insufficient availability of Nexavar led to the issuance of the license, making the drug accessible at a significantly lower cost. The Patent Controller’s decision, supported by legal stipulations and public health considerations, illustrates the balance between protecting patent rights and ensuring access to essential medicines. Ultimately, the article argues for the continued importance of compulsory licensing as a vital mechanism for enhancing public health outcomes, particularly in developing nations facing significant healthcare disparities.
INTRODUCTION
A patent is an exclusive right of an inventor. It prohibits another person from enjoying the benefit of the invention without the inventor’s consent. But in Compulsory License the government allows the other person to produce that patented invention without the patent holder’s permission. Not only the Indian Patent Act but also the TRIPS discusses the same and also gives some conditions on which the compulsory license can be granted. In the Indian Patent Act, of 1970 chapter XVI discusses compulsory license
INDIAN PATENT ACT ON COMPULSORY LICENSE
Section 84 of the Indian Patent Act, of 1970 states that after three years have passed since the patent was granted, any individual may apply to the Controller for a compulsory license on the following grounds at any time:
- Reasonable requirements of the public concerning the patented invention have not been satisfied, or
- That the patented invention is not available to the public at a reasonably affordable price, or
- That the patented invention has not worked in the territory of India.
TRIPS AND COMPULSORY LICENSE
Under the TRIPS agreement, the conditions for a compulsory license are defined. The term compulsory license is not explicitly mentioned in the agreement instead the word “other use without authorization of the right holder” is given in Article 31 of the TRIPS.
Article 31(b) of the TRIPS Agreement states that before a third party can use a patented invention without the patent holder’s consent, they must first attempt to obtain authorization from the patent holder on fair commercial terms. If such efforts are unsuccessful within a reasonable timeframe, the use may be allowed.
But in the case of a national emergency, extreme urgency, or for public non-commercial use such requirements are not necessary. In emergencies, the patent holder must still be notified as soon as possible. The duration of such use shall be limited to the purpose for which it was authorized. This use shall be non-exclusive.
DOHA DECLARATION AND COMPULSORY LICENSE
After the TRIPS agreement, some governments were unsure about the implementation of the TRIPS flexibilities. These issues were discussed at the Doha Ministerial Conference in November 2001. The Doha Declaration, approved by all WTO Ministers, has three main parts: first, opening statements; second, an agreement on how to interpret the TRIPS Agreement in matters of public health; and third, rules that confirm the flexibility of TRIPS and the rights of WTO members. It also sets up talks on compulsory licensing for countries that can’t produce medicines and extends the deadlines for the least developed countries to follow TRIPS rules.
[Image Sources: Shutterstock]
Paragraph 5 of the Doha Declaration highlights certain flexibilities for WTO members. In Paragraph 5(b), it is made clear that every country has the right to issue compulsory licenses and can freely decide the reasons for doing so, beyond just cases of national emergency. Paragraph 5(c) further empowers each country to define what qualifies as a national emergency, allowing them to make that determination based on their specific circumstances. Further, Para 6 of the declaration, states that the WTO members which have insufficient means of production in pharmaceutical sectors will face difficulties in making effective use of the compulsory license. Further, it instructs the council of TRIPS to find some expeditious solution to this problem.
DEVELOPED COUNTRIES VS. DEVELOPING COUNTRIES
After January 1, 2005, countries with strong pharmaceutical production capabilities could use compulsory licensing to negotiate with patent holders or produce medicines themselves if prices were too high. However, countries without the ability to produce drugs locally would not benefit from compulsory licensing since they couldn’t manufacture the medicines. Unless Article 31(f) of the TRIPS Agreement was changed or Article 30 was interpreted more broadly, these countries wouldn’t be able to get medicines from countries that could manufacture and export under compulsory licenses.
Negotiations under Paragraph 6 of the Doha Declaration aimed to solve this issue by December 31, 2002, but this deadline wasn’t met. By December 20, 2002, almost all WTO members, except the United States (and possibly Japan), were ready to agree to a waiver of Article 31(f) under certain conditions proposed by the Chair of the TRIPS Council on December 16, 2002. The U.S. objected because the waiver didn’t limit the types of diseases that could be addressed through compulsory licensing. The U.S. wanted the solution to focus only on diseases like HIV/AIDS, malaria, and tuberculosis, fearing that some wealthier developing countries might misuse the system to build their own pharmaceutical industries. The U.S. also proposed limiting which countries could use the system as importers or exporters. Developing countries argued that restricting the types of diseases made no sense for public health. For example, a condition like HIV/AIDS weakens the immune system, leading to other serious illnesses such as cancer and infections, while people in developing countries also suffer from a wide range of diseases, like heart conditions. Additionally, developed countries with strong pharmaceutical sectors don’t face disease restrictions when granting compulsory licenses, so the U.S. proposal would unfairly discriminate against poorer nations.
In simpler terms, this passage highlights the disagreement over whether compulsory licensing should be limited to specific diseases or be more broadly applied, with developing countries pushing for flexibility to address a wider range of public health needs.
CASE LAWS
India’s first compulsory license was issued on March 9, 2012, to Natco Pharma, allowing them to produce a generic version of Bayer Corporation’s cancer drug, Nexavar, used for treating liver and kidney cancer. Bayer sold the drug at an extremely high price of Rs 2.8 lakh for a month’s dosage, while Natco offered it at around Rs 9,000, making it affordable for a broader population. The Patent Controller set the terms of the compulsory license (CL), initially granting Bayer a 6% royalty on Natco’s profits. Bayer challenged this decision before the Indian Intellectual Property Appellate Board (IPAB).
The Patent Controller found that Bayer had supplied only 593 boxes of Nexavar, enough for fewer than 200 patients, representing just about 2% of the total demand. The Controller also noted that the number of eligible patients was likely higher than Bayer’s estimates, but even considering Bayer’s numbers, the drug’s availability was far below what was needed.
JUDGEMENT
The Patent Controller ultimately granted a compulsory license to Natco Pharma for the drug “Nexavar” under Section 84 of the Patents Act of 1970, as Bayer failed to meet the section’s requirements.
First, as per Section 84(1)(a), Bayer was not fulfilling the public’s reasonable needs for the drug. The second key issue, under Section 84(1)(b), was the drug’s unaffordability for the majority of the population. In India, affordability is a significant problem, with only a small percentage of people able to afford expensive medicines like Nexavar, leaving the vast majority unable to access them.
Third, Bayer did not meet the requirement under Section 84(1)(c) that the patented invention must be “worked” within India. The Controller also relied on Article 5(A)(2) of the Paris Convention, which allows each country to grant compulsory licenses to benefit the public.
Additionally, the Controller imposed several conditions on Natco, including that the monthly treatment cost must not exceed Rs. 8,880. Bayer would also receive a 7% royalty on the net sales of the drug.
CONCLUSION
In summary, compulsory licensing is an essential tool for reconciling patent rights with public health requirements, especially in developing nations. The Natco Pharma case regarding Nexavar illustrates how such licenses can improve access to vital medications by tackling problems of cost and availability. By utilizing the frameworks established in the Indian Patent Act and the TRIPS Agreement, countries can facilitate access to innovative healthcare solutions for those who need them most. As global health issues progress, the need for adaptable licensing systems will be crucial in ensuring equitable access to life-saving therapies and enhancing public health outcomes.
Author : Devyani Pranav, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD
REFERENCES
- The Patent Act,1970
- TRIPS Agreement
- https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm
- https://www.wto.org/english/tratop_e/trips_e/factsheet_pharm02_e.htm#compulsorylicensing
- https://www.iisd.org/system/files/publications/investment_sdc_dec_2003_9.pdf
- Bayer Corporation v Natco Pharma Ltd. & Ors., OA/35/2012/PT/MUM