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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.

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 (CL)

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.

Below is a review of the judicial precedents for CLs in India.

A) Bayer Corp. v. Natco Pharma

  • India’s first ever compulsory license was granted by the Patent Office on March 9, 2012, to Natco Pharma for the generic production of Bayer Corporation’s Nexavar, a life saving medicine used for treating liver and kidney cancer.
  • Bayer sold this drug at exorbitant rates, with one month’s worth of dosage costing around Rs 2.8 Lakh. Natco Pharma offered to sell it around for Rs 9000, making it affordable for people belonging to every stratum. The terms and conditions of the CL were created by the Controller, who awarded Bayer initially a 6% royalty on profits. Bayer appealed the Controller’s decision before the Indian Intellectual Property Appellate Board (IPAB).
  • The controller estimated that, if on average, every eligible cancer patient needs 3 packets (dosage for 3 months), as per the data, Bayer supplied 593 boxes which would fulfill the needs of less than 200 patients, which is only about 2% of the total requirement. The controller also reported that the number of eligible patients would be more than that estimated by Bayer, but even if that number is considered it is not even close to meeting the requirements. In light of the observations, it was clear that the reasonable requirements of the patients were not being met.
  • Moreover, the Controller observed that the patented invention was not available to the public at a reasonably affordable price.
  • Further, the controller observed that the patented invention was not created within India’s borders and rather was manufactured in Germany. It was held that the patented invention was unable to meet the criteria of working in the territory of India.

B) BDR Pharmaceuticals International Pvt Ltd v Bristol-Myers Squibb Co

  • 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 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 licence 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 licence 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 licence was refused.

C) Lee Pharma v AstraZeneca AB

  • 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 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.