Although the process of securing a patent itself is of considerable significance, the imperative of disclosing the operation of a patent in the relevant jurisdictions is often thrown out of the way. The reforms brought about in the IP laws of the country in the recent past mean that in the post-grant stage, the obligation to prove the operation of a patent has now taken centre stage, connected as it is with the dual-pronged challenge of compulsory licencing and revocation.
In this detailed study, Vatsala Sood closely examines the workings of patents and compulsory licenses in India.
A key position of the healthcare sector has been the issuing of universal prescription licences. A compulsory licence could, however, have an effect on innovation, with pharmaceutical firms being more dependent on generic products and depriving them of innovation. The need to finance and carry out research and development would be hindered by the fact that they will focus entirely on receiving a compulsory generic drug licence.
In developing and underdeveloped nations, affordability is a major challenge for average citizens. The issuance of a compulsory licence will then serve as a facilitator to control the prices of medicines. It would also ensure that people who are in real need are properly supplied. Compulsory licences have since enabled countries to embrace each other and placed them internationally on a single forum.
It also plays a vital role in curbing and defending against IPR monopolies, even if compulsory licences strip away the proprietary privilege of a patentee over his patented invention. An indispensable aspect of patents is invention. The award of compulsory licences should also not come at the expense of hampering growth, science and growth, which is vital for a country’s overall evolution and success.
II. The Meaning of Patent
World Intellectual Property Organization (WIPO) defines a patent as an exclusive right given to an invention which is a device or method which in general, allows for a new way of doing anything or proposes a new technological solution to a problem. A patentee shall have exclusive rights over a term of twenty years in respect to his invention and can prohibit others from the use of his patented product.
In India, the patent practice has concentrated heavily on awarding patents rather than anything else in the ensuing decade. In such conditions, however, a third party may be issued a compulsory licence to make use of a copyrighted device. In chapter XVI of the Indian Patents Act, 1970, this definition of compulsory licencing was issued.
III. The Working of Patents
Why the requirement? A Rational Outlook:
In order to understand the rationale behind whether a patentee or a licensee is expected to provide information on the workings of patents in India, it may be necessary, in particular, to investigate the legislative requirements envisaged in Section 83 of the Patents Act 1970, hereinafter referred to as the Act.
Under Chapter XVI, entitled ‘Patent work, compulsory licences and revocation,’ Section 83 tells us the basic rules related to the process of patented inventions. It lays down the rationale or statutory scheme for the grant of patents, including the grant of patents for the advancement of inventions and the safeguarding of the functioning of a copyrighted article in the country (Section 83(a)).
In addition, the patenting scheme means that a quid pro quo is maintained from the larger context of the Act. In exchange for the government’s copyright on the patented article, it is expected that the patentee and the licensee would disseminate this innovative information to the market, as well as use the patented innovation and supply the public with the patented invention at a fair rate. While only guiding principles and not rules by mandate are given in Section 83, it is helpful in understanding the specifications of working patented inventions in India.
In addition, the Patent and Licensee Statement of Work also offers valuable insight into the usefulness of the patenting method for different businesses and businesses that use proprietary technologies in their business processes.
IV. The Working of Patents – An Overview in the Indian Context
Under Section 146, read in accordance with Rule 131, a patentee or a licensee is required, exclusively or otherwise to apply a declaration concerning the functioning of a patented invention on a commercial scale in India in the manner specified (Form 27).
Furthermore, the patent controller may, within a period of two months from the date of issuance of such notice (Section 146(1)), provide a notice in writing authorising the patentee or the licensee to include such details relating to the use of Form 27. Form 27 allows the patentee or the licensee to include, among other details, the following related information:
1) Whether the invention has been worked:
(a) If not worked, the reasons for not working the invention, and the steps being taken to work the invention.
(b) If worked, quantum and value (in rupees) of the patented product:
- manufactured in India,
- imported from other countries, giving details of the countries concerned;
2) Licences and sub-licences granted during the year;
3) Whether the public requirement has been met, at a reasonable price either partly, adequately or to the fullest extent.
This information should be filed every calendar year, within three months of the end of each year, in compliance with Rule 131. Therefore, the 31st of March of the following year is the latest time a patentee or licensee may submit such details for a given calendar year.
V. Failure to Oblige
Failure to supply such information establishes a non-working assumption which can aid in the process of issuing compulsory licences. It is also a punishable crime and may impose a fine that may extend to 10 lakh rupees (i.e., INR one million or USD sixteen thousand). Furthermore, the deliberate supply of misleading knowledge is a crime punishable by imprisonment of up to six months or a fine of both (S. 122).
VI. Recent Developments
In a recent remarkable move, the Indian Patent Office (IPO) made publicly available all the working statements submitted by patentees during 2012. Section 146(3) specifically confers on the controller this right to publish information obtained by the controller according to Sections 146(1) and 146(1) respectively (2).
The publication by the IPO of such a large amount of work statements offers a host of useful knowledge on the feasibility of the patenting mechanism in India which can be used by different platforms, such as researchers, prospective licensees and legislators, to improve or change the country’s patent law and to determine the patents protected by the published work status.
In order to fulfil the conditions of the day, the local working requirements of the Indian Patent Act are therefore adaptable.
VII. Local Working of Patents
With reference to the local functioning of the patented technology with respect to compulsory licencing, it is noted that most of the leading pharmaceutical firms have a development unit in India. Patents of foreign producers importing a patented invention into India are also responsible for compulsory licencing.
As India is also a signatory to the TRIPS Agreement, it is also necessary to determine the TRIPS compatibility of the copyrighted invention’s local working specifications. According to Article 27(1) 4 which is titled as ‘Patentable Subject Matter’ it is specified that patent protection will be exercised without prejudice as to whether a product is manufactured or produced locally.
From the aforementioned, as far as India is concerned, the appropriateness of the local application of a patented invention with respect to the transition of technology depends on a number of considerations and not merely on the legislative criteria referred to in the Patents Act.
VIII. Benefits by Patent Office Publishing Working Details on Patents
All in all, the publishing of the ‘Statement of Working’ of the patented patents submitted by both patentees and licence holders creates a new dimension to the appraisal of the use of the patent system in the region. This knowledge collected by the patent office would allow generic pharmaceutical firms to assess which patents are appropriate for compulsory licencing purposes. The actual transfer of technology often happens with the operation of patents rather than with the number of patents issued in a nation.
IX. Non-working Patents, Compulsory Licensing and Revocation
Any person can apply to the Controller for a compulsory patent licence at any time after three years after the award of the patent on the ground that, inter alia, the patented invention does not work in India (S. 84).
In considering such a request, the Controller shall take into account a variety of considerations, including the essence of the invention, the steps taken by the patentee/licensee for the use of the invention and whether or not the applicant for the compulsory licence has attempted to obtain a voluntary licence from the patentee (S. 84(6)). Occasionally, the Controller may also adjourn the request for a compulsory licence in order to give, in particular, more time to operate under certain conditions (S. 86).
This involves determining whether sufficient steps have been taken by the patentee to at least start working on the invention on a commercial scale in India. The status of importing a patented article into India, and the consequences it may have for a decision on the operation of a patent, are also of interest to international companies. A non-working innovation would be measured by comparison, or otherwise, to the facility available for work in India. The importation of a patented invention is, therefore, legal.
However, in assessing the status of the patented invention, mere imports without exploring the possibility of manufacturing in India would be a factor.
The status of importing a patented article into India, and the consequences it may have for a decision on the operation of a patent, are also of interest to international companies. A non-working innovation would be measured by comparison, or otherwise, to the facility available for work in India.
The importation of a patented invention is, therefore, legal. However, in determining the status of the proprietary innovation, mere imports without investigating the prospect of manufacturing in India would be a consideration.
X. Compulsory Licensing, Revocation, and the Working of Patents
Legal regulations surrounding compulsory licencing are similarly intertwined with those relating to the functioning of patents. Section 84 states that an interested party may apply to the controller for a compulsory licence for a patent three years after the expiry of the term following the award of the patent on the ground that, inter alia, the patented invention is not used in India (Section 84(1)(a)).
Occasionally, the Controller may also postpone the appeal for a compulsory licence in order to give, in particular, more time to operate under certain circumstances (S. 86). This involves a determination by the controller as to whether the patentee has taken appropriate measures in order to at least initiate the commercial process of the invention in India. Given the confusion surrounding access to COVID-19 drugs, many countries have laid the legislative groundwork for the issue of compulsory licencing for goods which patent holders fail to make available.
Moreover, two years after the first compulsory licence has been issued, any person may order that the patent be revoked by the controller if, inter alia, the patented invention has not been in service in India. The holder of the compulsory licence is responsible for providing the evidence on which such revocation is obtained and for the essence of the interest of the applicant. Such a proposal must usually be determined within one year of its transmission to the Dispatcher (Section 85).
XI. Industrial Advantages
In addition to promoting growth in the area of research and technology, the release of job statements has many other market and trade-related benefits. For example, a patent-related working statement can help to estimate the worth/value of a patent and can thereby help a prospective licensee extract a price depending on the value of the patent to receive a licence. On the other hand, from a business acquisition or a business takeover standpoint, working statements can prove to be of considerable significance, since patents can form an integral part of a company’s intangible properties, and a strong patent portfolio, along with knowledge about its work, can aid businesses in negotiations.
In addition, small-scale companies can tailor the capital expended on research and development (R&D) based on knowledge gathered from available working statements according to the thriving technology specific to their sector. Therefore, evidence on the functioning of patents, inter alia, provides an understanding of the usefulness and economic feasibility of inventions, of the valuation of patent portfolios and of compulsory licencing.
XII. What are Compulsory Licenses under the Patents Act?
Compulsory licences are authorisations issued by the Controller General to a third party for the manufacture, use or selling of a specific product or for the use of a particular method which has been patented without the patent owner’s consent being necessary. This definition is known both nationally and globally, with both the (Indian) Patent Act, 1970, and the TRIPS Agreement expressly referencing it. Any pre-requisite requirements, laid out in sections 84-92, need to be met if a compulsory licence is to be given to anyone.
In accordance with Section 84, any person, irrespective of whether he is the holder of the patent’s licence, may upon expiry of three years, apply to the controller for the grant of a compulsory licence, providing that any of the following requirements are fulfilled:
- The fair public conditions with regard to the patented invention were not met.
- At a relatively reasonable price, the patented technology is not open to the public.
- The patented technology would not work within the jurisdiction of India.
Additionally, in compliance with section 92, compulsory licences can also be granted suo motu by the controller, pursuant to a notification issued by the central government, where either ‘national emergency’ or ‘serious urgency’ occurs or ‘public non-commercial use’ occurs.
A variety of additional considerations are taken into account by the controller, such as the essence of the invention, the ability of the claimant to use the device for public gain and reasonableness, but the applicant retains the sole discretion to issue the obligatory licence. And after a compulsory licence has been issued to a third party, the proprietor of the patent also has patent rights including the right to be paid for copies of the goods produced under the compulsory licence.
XIII. Cases pertaining to the Grant of Compulsory License
First Case in India on Granting Compulsory Licence
In 2012, India’s Patent Office issued India’s first compulsory licence to an Indian firm named Natco Pharma Ltd. for the generic manufacture of the proprietary drug called “sorafenib” by Bayer Corporation with the trading name “Nexavar.” The three conditions referred to in section 84 were satisfied, namely that the fair specifications of the public were not satisfied, that the medicine was not available to the public at an acceptable price or that the patented innovation operated in India was not satisfied.
In Bayer Corporation v. Natco Pharma Limited, Natco Pharma (Plaintiff) filed an application with the controller for a compulsory licence pursuant to Section 84(1) of the Patents Act 1970 in respect of a US-based pharmaceutical company, Bayer’s (defendant), a patented drug called sorafenib that is used in the treatment of liver and kidney cancer, under the trade name ‘Nexavar.’
The medicine was introduced into India to a very small degree, according to the claimant, and the drug was only available in a few towns and pharmacies. In comparison, for one month of medication, the medication was heavily priced at Rs. 2.8 Lakh, which was beyond financial control and unaffordable for the general population. Natco Pharma recommended marketing the medication for a month’s worth of dosage at Rs 8800 and making this life-saving drug widely available and inexpensive for the general citizens.
Upon hearing both sides, the Controller concluded that:
Bayer refused to meet the public’s fair expectations and in the three years after the patent on the drug was issued, only a negligible amount of the drug was made available to the public.
Secondly, Bayer’s, which was beyond the financial means and unaffordable for the general people, priced the drug very high. Thus, in fair terms, the drug was not available to the public. The Controller took the opinion, however, that the fair price should be construed in regard to the public and leaned in favour of Natco Pharma when it proposed to make the life-saving medication more reasonably and affordably accessible to the general public.
Finally, the proprietary innovation did not exist within the jurisdiction of India, which meant that the medicine was not produced in India. Moreover, as Bayer had manufacturing facilities in India, the manufacture of the drug could not be difficult in India.
Natco Pharma, however, pays a royalty to Bayer at the rate of 6 per cent of all revenue on a quarterly basis, which complies with the requirements set out in the United Nations Development Programme (UNDP) .
Subsequently, in 2013, the Ministry of Health recommended compulsory licences for three drugs used for cancer care- trastuzumab, ixabepilone and dasatinib; to allow the government to market these life-saving drugs at a lower and more affordable price, making them available to the ordinary public.
BDR Pharmaceuticals International Pvt Ltd v. Bristol-Myers Squibb Co 
The controller denied BDR’s application for a compulsory licence (4 March 2013) for the Bristol-Myers Squibb cancer drug SPRYCEL from BDR Pharmaceuticals. The controller denied BDR’s application for a compulsory licence by arguing that BDR has not made a prima facie argument for the award of the compulsory licence. The controller noticed that BDR had made no reasonable effort to secure a licence from the holder of the patent, nor had the claimant obtained the right to use the technology for public gain. The proposal for the award of a compulsory licence was also denied.
Lee Pharma v. AstraZeneca AB 
In the most recent case of compulsory licencing in India, Lee Pharma, an Indian pharmaceutical firm headquartered in Hyderabad, submitted an application for a compulsory licence (29 June 2015) for a patent covering Saxagliptin, AstraZeneca’s diabetes treatment drug. In order to make a prima facie case, Lee Pharma claimed that it had not replied to the patent owner’s request for a licence within a fair amount of time. The reasons alleged by Lee Pharma were:
- Failure of the patentee to comply with fair public requirements;
- The patented invention, at a relatively reasonable price, is not open to the public; and
- In India, patented inventions are not used.
Both three explanations, as well as the obligatory application, were, however, denied. The proposal was dismissed on the ground that the appropriate criteria of the public were not defined by Lee Pharma and that the competitive requirement of Saxagliptin was not further shown in comparison to other medicines on the market. Furthermore, the controller held that all the relevant drugs offered on the market came under the same price range and that it was not justified to allege that Saxagliptin alone was marketed at an unaffordable price. The controller further reported that because of its non-availability, Lee Pharma refused to show the precise number of patients who were unable to access the medication.
In a variety of other cases relating to the issuance of a compulsory licence in the pharmaceutical industry, the controller denied the grant on numerous grounds, such as failure to prove a prima facie argument, failure to apply for a patent licence previous to the application for a compulsory licence, and failure to prove the public use of the substance requested by the compulsory licence. The Court would analyse the whole case, the strength of the patentee’s case and the strength of the defence.
Recently, in some cases, the Indian courts have ruled that the clause against anti-competitive practises in the competition act and the provision of compulsory licencing in the patent act are not mutually exclusive; they must in effect, be read jointly. The Controller was also entitled to consider whether a patentee had implemented anti-competitive practices. However, if CCI eventually considered the action of a patentee to be anti-competitive and its conclusion had reached finality, the controller would then continue on that basis and the patentee would be barred from contending to the contrary on the principle of issuing estoppel.
With regard to the issuance of a compulsory licence, the judicial approach is that the law is for general welfare and cannot be misused in order to diminish the interests of the patent proprietors. There must be a compromise between the rights and making use of the commodity for welfare purposes.
The compulsory licencing clause must be used prudently since it represents an exemption and versatility to the general patent law. The clause lies in the middle; neither absolute patent immunity is given nor is it absolutely rejected that it explicitly affects the financing of research and the unfettered application of this provision will contribute to multinational pharmaceutical firms hesitating to launch new medical drugs in other countries. Therefore, if businesses wish to shield their goods from compulsory licences, they have to set the cost of their proprietary module according to the country’s economic position.
In underdeveloped nations, the universal certification has now become the salvation for financially challenged patients. Owing to the economic situation of the majority population, India wants this provision but the difficulty is that it must, on the one side, comply with universal patent rights requirements and on the other, preserve public health.
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