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John F. Kennedy famously said that “There are risks and costs to action. But they are far less than the risks of comfortable inaction”. In the context of patents, this adage augurs well with respect to the working of a patented invention.

Objective behind granting a patent for an invention

Section 83 of the Indian Patents Act, 1970 specifically provides that patents are granted to encourage inventions and to ensure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay. Moreover, it is clarified that patents are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article. The protection and enforcement of patent rights contribute to the promotion of technological innovation and to the transfer and dissemination of technology. Further, the patent rights are safeguarded to the mutual advantage of producers and users of technological knowledge in a manner conducive to social and economic welfare and for balancing the rights and obligations.

The Section further states that the patents granted do not impede protection of public health and nutrition and should act as instruments to promote public interest especially in sectors of vital importance for socio-economic and technological development of India. Patents are granted to make the benefit of the patented invention available at reasonably affordable prices to the public.

However, it is clarified that the granted patents do not in any way prohibit the Central Government in taking measures to protect public health.

Additionally, section 146 of the Act requires the patentee to furnish such details in the form of working statement to establish an extent to which the patented invention has been commercially worked in India during a financial year. Such a working statement has to be mandatorily submitted before the end of the financial year (the time can be further extended upon suitable request to the Controller upto 30th September).

Compulsory License

A compulsory license (CL) is an authorization granted by the government of a country to a third party other than the patentee to produce a patented product without the consent of the patent owner who has been taking undue advantage of exclusive rights granted by patent. Compulsory licensing tries to eliminate misuse of patent rights by a patent holder in view of public health or anti-competitive practices which would result in restricting trade or hindering technology transfer.

Compulsory Licensing in India

Under the Indian patent regime, Section 84 of the Patents Act, 1970 provides that at any time after the expiration of three years from the date of the grant of a patent, any person interested (including a license holder of the patent as well) may make an application to the Controller for grant of compulsory licence on any of the grounds of:

  • The 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; and/or
  • The patented invention is not worked in the territory of India.

Objective for granting compulsory licences

Section 89 of the Act particularly provides the rationale behind granting a CL. The primary objective for granting a CL is to enable the patented inventions to be worked on a commercial scale in the territory of India without undue delay and to the fullest extent that is reasonably practicable. Moreover, CLs are granted for ensuring that the interests of any person for the time being working or developing an invention in the territory of India under the protection of a patent are not unfairly prejudiced.

Aspects considered by the Controller for an application for CL

It is mandatory on the part of the Controller to take into account the particulars of –

  • nature of the invention;
  • time elapsed since sealing of the patent;
  • measures already taken by the patentee or any licensee to make full use of the invention;
  • ability of the applicant to work the invention to the public advantage;
  • capacity of the applicant to undertake the risk in providing capital and working the invention, if the CL were granted;
  • efforts made by the applicant to obtain a licence from the patentee on reasonable terms and conditions and success of such efforts within 6 months. However, such efforts won’t be considered in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on establishment of a ground of anti­competitive practices adopted by the patentee.

Provisions for satisfying reasonable requirements of the public

Section 84(7) provides that the reasonable requirements of the public shall be deemed not to have been satisfied on following accounts –

  • refusal of the patentee to grant a licence or licences on reasonable terms including existing trade or industry or development or establishment of any new trade or industry in India or trade or industry of any person or class of persons trading or manufacturing in India is prejudiced, demand for the patented article has not been met to an adequate extent or on reasonable terms, market for export of the patented article manufactured in India is not being supplied or developed, establishment or development of commercial activities in India is prejudiced;
  • severe conditions imposed by the patentee upon the grant of licences under the patent or upon the purchase resulting in hire or use of the patented article or process, manufacture, use or sale of materials not protected by the patent, or the establishment or development of any trade or industry in India is prejudiced;
  • severe condition imposed by the patentee upon the grant of licences under the patent to provide exclusive grant back, prevention to challenges to the validity of patent or coercive package licensing;
  • patented invention is not being worked in the territory of India on a commercial scale to an adequate extent or is not being so worked to the fullest extent that is reasonably practicable; and/or
  • working of the patented invention in the territory of India on a commercial scale is being prevented or hindered by the importation from abroad of the patented article.

Procedure for granting a compulsory license

Section 87 of the Act determines the procedure that is to be followed for an application for CL. The steps are as follows –

  1. Step 1 – Filing application for grant of CL for a patented invention in Form 17 by any party interested. The nature of the applicant’s interest along with facts and particulars on which the application is based is to be clearly stated in and along with Form 17.
  2. Step 2 – Analysis of the facts and conditions of the application by the Controller for effecting if a prima facie case is being made by the applicant against the patentee.
  3. Step 3 – Issuing a notice to the applicant by the Controller if he is unsatisfied with the request and will provide a statement rejecting the compulsory license. The applicant may request a hearing with the Controller, within a month from the date of notice of rejection.
  4. Step 4 – Deciding the matter by the Controller at the conclusion of the hearing. If the matter is decided in favor of the applicant, necessary terms and conditions shall be decided for granting of the compulsory license. The royalties to be paid to the patentee will be decided by the Controller. The patentee’s investment in the invention, workability of the patentee’s invention by the applicant, the selling price of the patented article, and terms of the license will be considered.
  5. Step 5 – Granting CL to the applicant by the Controller. If an application for CL is made by a license holder for the patented, the Controller may order the existing licence to be cancelled, or may, if he thinks fit, instead of making an order for the grant of a licence to the applicant, order the existing licence to be amended.
Fig. Terms and conditions settled by the Controller while granting a CL

Special provisions relating to compulsory licenses

Section 92 provides that in circumstances of “National emergency” or in circumstances of “Extreme urgency” or in case of “Public non-commercial use” if the Central Government is satisfied that it is necessary that compulsory licenses should be granted at any time after the sealing thereof to work the invention, it may make a declaration to that effect, by notification in the Official Gazette. Thereafter, the Controller shall on application made at any time after the notification by any person interested grant to the applicant a license on such terms and conditions as he thinks fit.

Further, section 92A states that Compulsory license shall be available for manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems, provided compulsory license has been granted by such country or such country has allowed importation of the patented pharmaceutical products from India. Upon receipt of an application in the prescribed manner the Controller shall grant a compulsory license solely for manufacture and export of the concerned pharmaceutical product to such country under such terms and conditions as may be specified and published by him.

Termination of CL

Section 94 provides that on an application made by the patentee or any other person deriving title or interest in the patent, a compulsory license granted under section 84 may be terminated by the controller, if and when the circumstances that gave rise to the grant thereof no longer exist and such circumstances are unlikely to recur. Further, the holder of the compulsory license shall have the right to object to such termination.

Section 85 states that the Central Government or any person interested may after the expiration of two years from the date of the order granting the first CL, apply to the Controller for an order revoking the patent on the ground that the patented invention has not been worked in the territory of India or that reasonable requirements of the public with respect to the patented invention has not been satisfied or that the patented invention is not available to the public at a reasonably affordable price.

Compulsory Licensing can be a great measure controlling the prices of the patented invention, checking anti-competitive measures, satisfying public needs and demands and other provisions. However, the balance between public interest and the rights of the patentee with respect to fostering innovation is crucial to be endeavored upon.