UNIVERSITY INSTITUTE OF LEGAL STUDIES,

PANJAB UNIVERSITY, CHANDIGARH

COMPULSORY LICENSING
OF PATENTS IN INDIA
A project report to be submitted on the above topic in the subject of Intellectual
Property Laws for partial fulfilment of the curriculum of the degree B.A. LL.B.
(Hons.), 10th Semester.

SUBMITTED TO: SUBMITTED BY:

DR. SUPREET GILL AMANDEEP KAUR

ASSISTANT PROFESSOR B.A. LL. B. (HONS.)

UILS SECTION – C

PANJAB UNIVERSITY SEMESTER – 10 TH

CHANDIGARH ROLL NO. – 176/19

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ACKNOWLEDGEMENT
The success and the final outcome of this project required a lot of guidance and assistance from
many people and I am extremely privileged to have got this all along the completion of my
project. All that I have done is only due to such supervision and assistance and I would not forget
to thank them.

I respect and thank, Dr. Supreet Gill for providing me an opportunity to do the project of
Intellectual Property Laws on the topic of “Compulsory Licensing of Patents in India” and
giving me all support and guidance, which made me complete the project duly. I am extremely
thankful to her for providing such a nice support and guidance, although she had busy schedule.

I would also like to thank my parents and friends who helped me a lot in finalizing this project
within the limited time frame.

Amandeep Kaur

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TABLE OF CONTENTS
Acknowledgement ......................................................................................................................... 2

Table of Contents ........................................................................................................................... 3

Introduction ................................................................................................................................... 4

What is a Patent ............................................................................................................................. 4

Concept of Licensing of Patents .................................................................................................... 5

Compulsory Licensing ................................................................................................................... 6

Objectives of Compulsory Licensing ............................................................................................ 6

Origins of Compulsory Licensing .................................................................................................. 7

TRIPS Agreement .......................................................................................................................... 8

Compulsory Licensing In India...................................................................................................... 8

1. Section 84 ........................................................................................................................... 8

2. Section 92 ........................................................................................................................... 9

First Compulsory License Granted In India: Bayer Corporation. V. Union of India, [AIR 2014
Bom 178] ....................................................................................................................................... 9

1. Reasonable Requirements of Public are Satisfied [Sec. 84 (1) (a)].................................. 10

2. Non-Availability at Reasonably Affordable Price [Sec. 84 (1) (b)] ................................. 10

3. Non-working in India [Sec. 84 (1) (c)] ............................................................................. 10

Cases where an applicant successfully opposed a compulsory license of its patent ................... 11

1. BDR Pharmaceuticals International Pvt. Ltd, V. Bristol Myers Squibb Co, (C.L.A. No. 1
Of 2013) ................................................................................................................................... 11

2. Lee Pharma V. Astrazeneca, (C.L.A. No. 1 Of 2015)....................................................... 12

Conclusion ................................................................................................................................... 14

Bibliography ................................................................................................................................ 15

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INTRODUCTION
Compulsory licensing comes under The Patent Act, 1970. Patents are granted to promote new
inventions which is a product or a process that provides a new way of doing something or offers
a new technical solution to a problem. To get a patent, technical information about the invention
must be disclosed to the public in a patent application.

Compulsory licensing is a measure which is provided by the patent act. It ensures that the patentee
do not misuse their patent rights. Compulsory Licensing is given only for public health and
nutrition. Simply speaking, it is a license given to a 3rd party to manufacture, use, or sell the
product or use the process that provides a new way of doing something which has been already
granted patent without the permission of the owner. This is done for the public health, or in
national emergency and health crisis. As this license works against the owner of the patent there
are conditions that are given by the government to be fulfilled.

The need for compulsory licensing can be easily understood by the following example: In 1769,
James Watt was granted a patent for his tremendous improvement of steam engine technology
which led to the wide use of efficient steam power across many industries, and in fact became
absolutely fundamental to the industrial revolution. Watt monopolized his invention and
prevented others- notably William Murdoch (his employee) and Jonathan Hornblower (a rival
inventor) – from further developing steam technology. It has been suggested that had Watt’s patent
been compulsorily licensed, society would have benefited from efficient steam engines at least
ten years earlier than it did.

WHAT IS A PATENT
In general patent means “exclusive right to the first and true inventor to make, use or vend his
invention.”

The term patent has been derived from the Latin word “patene” which means to open. Patent is
an exclusive right granted to an inventor with respect to that invention which he discloses to the
public. Therefore, we can say that patent like a reward is granted to an inventor in return of his
disclosure of his invention to the public for the benefit of the society.

WIPO mentions, “A Patent as exclusive right granted by a government for invention, which is a
product or a process that provides, in general, new way of doing something, or offers a new
technical solution or offers a new technical solution to problem”

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Patent is a monopoly right conferred by the Patent Office on an inventor to exploit his invention
for a limited period of time. During this period, the inventor is entitled to exclude anyone else
from commercially exploiting his invention. The exclusive rights of the inventor can be exercised
by a person other than the inventor with the latter's previous authorisation. The person to whom
a patent is granted is known as the patentee.

A “Patent is a legal right”, granted to an inventor as a quid pro quo for unveiling his invention in
public. It is statutory right for creation of new and useful article or improvement of existing article
or new proceed of making article.

CONCEPT OF LICENSING OF PATENTS

The notion of licensing patents incepts in 18th century with the operation of Paris Convention,
1883 and considering its significance later this notion got introduced in other domestic and
international legal instruments across world as well. “Compulsory licence is not an
unmentionable word. Under a different name, it exists in the TRIPS (Trade-related Aspects of
Intellectual Property Rights) too where it is called, ‘Other use without authorization of the right
holder’...”.

Theoretically, licensing is “An act of granting or sharing patent related rights under a legal
arrangement is known as licensing”. Transfer of bundle of rights which are restricted or limited
by various factors like geographical area, time span or area of use, is done through patent
licensing. Such an act shall in no way transfer ownership of the invention, but other rights for
example right to usage, make products, sell product etc.

Licensing shall be ideally a voluntary effort by patent holder to share rights with another person
in consideration for royalty for the same. But wherever it is not so affected voluntarily,
government may step it to exercise its constitutional and legal power to grant such license to
another person, on specified grounds under Patent act and without the will of patentee. License
can be a contractual arrangement by will of patentee and license holder i.e. Voluntary license, or
it could be the one granted by government irrespective of consent of patentee i.e. compulsory
license. There had been lot of hue and cry around the licensing practices relating to patents and
therefore, this study will limit its focus on the practices and issues related to compulsory licensing
in India.

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COMPULSORY LICENSING
. The practice of granting compulsory license is an exception to the general rule that patent holders
have an exclusive right over their novel invention. In this situation, authorization is given to take
advantage of an invention without the patent holder’s consent.

According to WTO, "Compulsory licensing is when a government allows someone else to

produce a patented product or process without the consent of the patent owner or plans to use the
patent-protected invention itself.

The purpose of a compulsory license is to increase access to indispensable goods by providing a

wider use of the invention than the patent holder intended. As a result, the patent holder is
compulsorily required to give up a large part of his property right for the purported benefit of the
public. The issuance of a compulsory license comes at a high price in the world of pharmaceutical
sector. The patent holder’s investment-backed expectation of earning a profit from the patented
medicine is disrupted when his exclusive right over his patented product disappears.

OBJECTIVES OF COMPULSORY LICENSING

There are a number of reasons as to why the compulsory licenses should be granted even though
they are against the right holder who have put in their best efforts for that invention creation and
getting it patented.

The major reasons which can be put forward in this respect are as mentioned below:

i. If patented drugs are unaffordable and/or unavailable, a compulsory license for local
production is often the only solution to solve procurement problems, increase local
availability of drugs and save on costs for patients and the national health budget.

ii. It ensures dissemination of technologies, knowledge and supports development in

totality.

iii. Compulsory License ensures access to products and processes whether or not monopoly
holder agrees.

iv. Presence of lucid, workable provisions of Compulsory Licensing has a distinct

advantage of creating an atmosphere to encourage grant of contractual licenses.

v. Compulsory Licensing not only provides opportunities for competition but also
maintains the growth opportunities for the generics.

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 vi. Compulsory Licensing provisions raise consumer confidence in the patent system and
reinforce their belief in existing political set up which is necessary for social tranquility
and political stability.

vii. It gives a message to the world at large that the sovereign supreme exists and very much
cares for the subjects of the nation and continues to abide by the primary duty of
providing safety to subjects and assurance of their lives.

ORIGINS OF COMPULSORY LICENSING

Compulsory licensing can be traced back to the UK Statute of Monopolies in 1624 which ruled
out monopolies associated with patent. However compulsory licensing only became an official
proposal in the early 19th century. Countries in Europe (example the UK) popularized compulsory
licensing under its anti-patent movements in the 1850s.

Article 5A(2) of the Paris Convention of 1883 provides that “Each country of the Union shall
have the right to adopt legislative measures providing for the grant of compulsory licenses to
thwart the abuses which might result from the exercise of the exclusive rights conferred by the
patent., for example, failure to work.” During the World Wars, compulsory licensing was resorted
to for the purpose of sharing aviation technology and the manufacture of various drugs like
penicillin.

Since the 1990s particularly, after signing of the TRIPS agreement in 1995, compulsory licensing
stipulation has become an obligation of nations to deal with non-working issues, consider public
interest, and handle non-commercial use and unfair competition. Further to this step, it was Doha
Declaration which paid detailed attention to patented drugs that could cure wide spread fatal
diseases.

In consequence, compulsory licensing could be issued in developed countries to manufacture

patented drugs on condition for export to least developed countries to treat epidemic diseases.
However compulsory licensing may also be issued by a government for non-commercial public
use or as a remedy to anti-competitive practice. Since 1995 it is mandatory for WTO members to
include compulsory licensing as part of their patent law stipulation.

The TRIPs Agreement notes that its patent provisions must comply with the Paris Convention of
1967. Under the Paris Convention,’ the term “patent” is interpreted broadly to encompass all
forms of patent laws created within its member nations.

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TRIPS AGREEMENT
The WTO, in December 1994, approved an important treaty, the Trade-Related Aspects of
Intellectual Property Rights (TRIPS Agreement) which came into effect on January 1, 1995.
Primary objective of TRIPS Agreement was to minimize the distortions and impediments to
global trade by giving due importance to protection of IPRs. It provided for minimum standards
to harmonize divergent domestic laws of the WTO member countries and provided mandatory
rights for right holders. It required all WTO member states to adopt Regulations relating to IPRs
as laid down in the treaty. TRIPS Agreement did not repeal Paris Convention. Rather it
incorporated Paris Convention under its Article 2(1)6 and both apply on equal footing.

TRIPS, however, provided for higher standards of Intellectual Property protection. Before 1995,
when TRIPS Agreement was not concluded, almost 50 countries had excluded drugs from
patentability. But TRIPS Agreement prohibited any such exclusion.

To enjoy protection, the invention must fulfil three conditions namely, “it must be new, it involves
an inventive step, and it is capable of industrial application”. Moreover, TRIPS Agreement, under
Article 28, provides the patent holders exclusive rights to prevent third parties from making,
using, offering for sale, selling or importing patented products without consent of the patent
holder. These monopoly rights are provided to the patent holders for a period of twenty years.

COMPULSORY LICENSING IN INDIA

The relevant system of compulsory licensing is contained in Ch. XVI of the Indian Patent Act
comprising Sections 82 to 94.

1. Section 84

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 the following conditions:

i. The reasonable requirements of the public with respect to the patented invention have
not been satisfied

ii. The patented invention is not available to the public at a reasonably affordable price

iii. The patented invention is not worked in the territory of India.

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The Controller, while granting compulsory license is required to take into account factors such as
the nature of the invention, 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, time
elapsed since the grant of the patent, and so on.

2. Section 92

In addition to this, according to Section 92 of the Act, compulsory licenses can also be issued Suo
motu by the Controller of Patents pursuant to a notification issued by the Central Government if
there is

i. A national emergency, or

ii. Extreme urgency, or

iii. In cases of “public non-commercial use”.

The mechanism under this provision is set in motion by the Central Government when it notifies
in the Official Gazette that extra-ordinary circumstances have dictated the grant of compulsory
licenses in relation to patents which help to address the exigency. However, Section 92(2) still
requires a person interested to apply to the Controller for grant of a compulsory license.

FIRST COMPULSORY LICENSE GRANTED IN INDIA: BAYER

CORPORATION. V. UNION OF INDIA, [AIR 2014 BOM 178]
The Controller of Patents passed an order of compulsory license (CL) against Bayer’s patent on
drug Nexavar on March 09, 2012, which is India’s first compulsory license and is resulting from
India’s first CL application filed by Natco Pharma Ltd. This compulsory license was in respect
of the Bayer’s patented invented drug—Sorafenib Tosylate (compound of Carboxyaryl
Substituted Diphenyl Ureas) sold under brand name Nexavar (patented drug). The patented drug
is used in the treatment of patients suffering from Kidney cancer i.e. Renal Cell Carcinoma (RCC)
and liver cancer i.e. Hepatocellular Carcinoma (HCC). The aforesaid patented drug acts more as
a palliative—i.e., relieves patients from pain and to an extent also slows down the spread of cancer
by restricting the speed with which the cancer cells grow.

The grant permits Nacto to manufacture and market a generic version of Nexavar for Rs. 8800
for 120 tablets per month treatment (against Rs 284,428 per month by Bayer) in return for paying

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6 percent royalty on sales to Bayer. The order also makes it obligatory for Natco to supply the
drug free of cost to at least 600 needy patients per year.

The CL was granted in accordance with all three grounds, namely: (i) that the reasonable
requirements of public with respect to the patented invention have not been satisfied; (ii) that the
patented invention is not available to the public at reasonably affordable price; and (iii) that the
patented invention is not worked in India described under section 84 of the Indian Patent Act.
The Controller gave his reasoning and conclusion separately on each of the above three grounds
and found that all the grounds are satisfied in granting the CL against Bayer. His brief reasoning
are as below:

1. Reasonable Requirements of Public are Satisfied [Sec. 84 (1) (a)]

Controller found that the drug is available to only 2 percent of the eligible patients, and thus
reasonable requirements of the public are not satisfied. He noted: “…there is requirement of at
least 8,842 patients. Even after the lapse of three years, the Patentee has imported and made
available only an insignificant proportion of the reasonable requirement of the patented product
in India.” He did not take into consideration the sales of the generic version of the same drug in
India by Cipla at lesser prices, which was one of the reasons given by Bayer for lesser sales of
the patented drug by Bayer in India. The Controller has also taken into consideration the Form
27 (Working of invention statement) filed by Bayer in 2009 and 2010, which shows only an
insignificant quantum of sales (only Rs. 2 crore for 2009) for the eligible patients.

2. Non-Availability at Reasonably Affordable Price [Sec. 84 (1) (b)]

Controller concluded that sales by Bayer at a price of about Rs. 2,80,000/- (for a month)
constitutes a fraction of the requirement of the public, and the only reason for not buying by them
is due to no reasonable affordability. He concludes, “Hence, I conclude beyond that the patented
invention was not available to public at a reasonably affordably price…Consequently a
compulsory license be issued to the Applicant…”

3. Non-working in India [Sec. 84 (1) (c)]

The Controller after reading together the international agreements on intellectual property
including TRIPS, Paris convention and the Indian Patent statutes, came to the conclusion that the
“worked in the territory of India” means “manufactured to a reasonable extent in India.” Bayer

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failed to manufacture the drug in India, even four years after the patent grant date and further
failed to grant voluntary license for manufacturing in India; thus, CL is to be issued to the
Applicant.

The Controller’s decision to grant CL was upheld by the Intellectual Property Appellate Board
(IPAB) in an appeal filed by Bayer Corporation, with increasing royalty from 6 percent to 7
percent. It also disagreed with finding of the Controller that “worked in the territory of India”
means “manufactured to a reasonable extent in India. The Tribunal in its order dated 4 March
2013, took a view that the requirement of working of the patented drug in India could also be
satisfied by importing the patented drug on the patent holder satisfying the authorities under the
Act that the manufacture of the patented drug was not possible in India. Therefore, it held that
manufacture in India was not necessary in every case for satisfaction of Section 84(1) (c) of the
Act. It held that the working in India would have to be decided on a case-by-case basis, and there
can be no general rule that when the products are imported into India and not manufactured, it
follows that patented drugs is not being worked in the territory of India.

In a Writ Petition filed by Bayer Corporation before the Bombay High Court, the Division Bench
dismissed the petition and upheld the Order of the Tribunal (IPAB) on July 15, 2014. The Supreme
Court, on December 12, 2014 dismissed a Special Leave Petition filed by Bayer Corporation.
Apex Court ordered that there was no reason to interfere with the order of the Bombay High Court
and that the question of law could be adjudicated in future CL cases.

This is the only license granted by the Controller in India.

CASES WHERE AN APPLICANT SUCCESSFULLY OPPOSED A

COMPULSORY LICENSE OF ITS PATENT
There are two cases of compulsory licenses being rejected by the Controller General of Patents
on the prima facie grounds of rejections. No need arose to oppose by the Patent Holders.

1. BDR Pharmaceuticals International Pvt. Ltd, V. Bristol Myers Squibb Co,

(C.L.A. No. 1 Of 2013)

In this case, the Controller rejected BDR Pharmaceuticals Pvt. Ltd.’s application for CL
for Bristol Myers Squibb’s (BMS) cancer drug SPRYCEL. SPRYCEL is a brand name
in which the active pharmaceutical ingredient is DASATINIB, used by patients with

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 Chronic Myeloid Leukemia which is covered in patent number IN203937.

BDR Pharmaceutical submitted that the price of each tablet sold by the patentee was
INR 2761/- which works out to INR 1, 65,680/- for 60 tablets per month per patient and
about INR 19, 88,160/- per year per patient. BDR submitted that it will make the drug
available to the public at a proposed price of Rs. 135/- per tablet which will work out to
Rs. 8100/- per month and moreover the drug will be offered free of cost to a certain
percentage of patients.

However, the Controller stated that a prima facie case was not being made out for the
making of an order under Section 84 of the Act as ‘the applicant had not acquired the
ability to work the invention to the public advantage’, in the absence of the requisite
approval from DCGI, and ‘the applicant has also not made efforts to obtain a license
from the patentee on reasonable terms and conditions.’

The Controller stated that the applicant ought to have appreciated that a
statement/opinion given by the attorney of the patentee in a journal cannot be taken as
evidence against the patentee.

The Controller further stated that the term ‘efforts’ is not accompanied by the qualifying
term ‘reasonable’ and the applicant ought to have appreciated that the duty cast upon the
applicant to make ‘efforts’ is absolute and inflexible and without exceptions.

The controller observed that BDR had made no credible attempt to procure a license
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 license was
refused.

2. Lee Pharma V. Astrazeneca, (C.L.A. No. 1 Of 2015)

In this case, Lee Pharma filed compulsory licensing for producing and selling patented
drug called ‘Saxagliptin’ protected in the name of AstraZeneca having patent number
206543. ‘Saxagliptin’ was used for curing Type II Diabetes Mellitus.

Lee pharma had requested AstraZeneca in 2014 for granting a license to the drug but
AstraZeneca did not accept and gave the reasons for not giving compulsory licensing.
AstraZeneca replied to Lee Pharma seeking certain clarifications and disagreeing with
Lee’s claim that SAXAGLIPTIN was not available to the general public at a reasonably
affordable price. However, due to some technical failure in communication between the

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 two parties, a period of one year lapsed without any progress of communication on the
issue and Lee Pharma then decided to approach the Controller of Patents.

Based on the evidences submitted to the Controller by the applicant, the controller found
that Lee Pharma had made efforts to obtain a license from the patentee on mutually
agreeable terms and a reasonable period as envisaged under Section 84(6) of the Act had
elapsed without the efforts being successful.

The Controller observed that, in respect to clause (a) of sub-section (1) of Section 84 of
the Patents Act; the applicant submitted data and statistics to show that the reasonable
requirements of the public had not been satisfied by the patented invention. However,
due to the availability of substitutes to the drug under question, the Controller found that
a case could not be made out by the applicant to the effect that the reasonable
requirements of the public were not being satisfied.

Further, the Controller observed that the Lee Pharma’s proposal to sell the drug in the
range of Rs 27 to 31.50 per tablet was paradoxical to its claim that AstraZeneca’s drug
was not available to the public at a reasonably affordable price, because the selling price
range proposed by Lee Pharma was several times the alleged cost of import and thus the
applicants own argument went against itself, and hence no case was made out.

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. Hence, the CL
was not granted.

Considering the last two compulsory license cases in India, it is clear that the provisions of
compulsory license cannot be misemployed to diminish the rights of the patent holders, and that
the basic jurisprudence governing the subject of compulsory license lies in balancing the
conflicting interest of the patentee’s exclusive rights and making the invention available at an
affordable price to third parties in case of need.

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CONCLUSION
Compulsory licensing is important for an underdeveloped or developing countries. As, the
resources which are not available in a particular country can be a necessity for that country.
Medicine is a necessity for the society and if a patented drug is available in a country but is very
expensive that a normal person cannot afford that drug then the government of that country has
to do something for the people who cannot afford it. Here, the compulsory license role comes in.
Compulsory licenses will make the similar product available to the people who cannot afford that
drug. TRIPS agreement for the public health was the first step by WHO to protect the people from
sickness and diseases which is common in countries but the medicine is not available.

While only one compulsory license has been issued by the Patent Office till date, certain sections
of the international business community have felt that even this instance was not in compliance
with international standards and regulations for the protection of intellectual property. India in
particular is presented with a unique challenge, as owing to the vast disparity in the economic
conditions of its citizens, it becomes invariably hard for the government to strike a balance
between ensuring strict compliance with international standards for patent protection, and
adequately safeguarding public health and well-being.

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BIBLIOGRAPHY
1. “Compulsory License Regime of Intellectual Property Rights with Reference to TRIPS”,
available at http://www.manupatrafast.com/ , last visited on 14th April, 2024.

2. “Compulsory Licensing of Patents In India”, available at http://www.ssrn.com/ , last

visited on 14th April, 2024.

3. Dr. Supreet, Law relating to Intellectual Property Rights, Bookwards Chandigarh, 1 st

Edition, 2024

4. Meenu Paul, Intellectual Property Laws, Allahabad Law Agency, Faridabad, 5 th Edition
2014.

5. Dr. V.K. Ahuja, Law relating to Intellectual Property Rights, LexisNexis Butterworths,
New Delhi, 12th Edition 2014

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