• Compulsory licenses are licenses that are granted by a government to an individual or company seeking to use patents, copyrighted works or other types of intellectual property, to do so without seeking the owner's consent.
• Compulsory licenses-involuntary contracts between a willing buyer and an unwilling seller imposed or enforced by the state.
• The individual or company granted compulsory license have to pay the owner a set fee for the license.
• Objective of granting compulsory license is to prevent the abuse of monopoly granted.
• Nations currently have the right to issue compulsory licenses on patents and copyrights.
COMPULSORY LICENSES UNDER INTERNATIONAL LAW
Paris Convention for the Protection of Industrial Property :
• The purpose of the Paris Convention was to establish a system for inventors to protect their inventions internationally.
• Article 5
• The Paris Convention for the Protection of Industrial Property states "each contracting state shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work."
Berne Convention for the Protection of Literary and Artistic Works-Article 11bis(2) and Article 13(1) provide the legal basis for compulsory licensing at international level.
TRIPS - Trade related aspects of intellectual property
• The World Trade Organization provisions on intellectual property.
• Contains rules on patents, copyrights and trademarks.
• Compulsory licenses and a number of restrictions on the use of compulsory licenses-Article 31 of TRIPS.
India is a party to above international agreements for the protection of intellectual property that have provisions regulating compulsory licensing.
COMPULSORY LICENSES AND PATENTS
• The grant of a patent gives its owner (patentee) a limited period of exclusivity where the patentee can prevent others from practicing the patented invention.
• This limited period of exclusivity affords the patentee control over the invention’s price and, in turn, gives the patentee a mechanism by which he/she can regain research and development costs.
• This right to exclusivity is enforced in most countries by the judicial system, with the unauthorized manufacture, use, sale, offer to sale, or import of a patented technology deemed to be infringement.
• The government has the power to revoke or limit a previously granted exclusive patent right.
• Compulsory licensees take away the patentee’s exclusive control over the patented technology.
• Specific terms vary from country to country,
• Three basic situations:
1. where a dependent patent is being blocked: Where a patented invention (‘dependent patent’) cannot be worked without exploiting an earlier patented invention (‘original patent’), the owner of the dependent patent generally must obtain a license over the original patented invention.
2. the patent is not being worked, or
3. the invention relates to food or medicine.
• Any interested person after expiry of three years from grant of patent, may make an application to the Controller for grant of compulsory license on the grounds that:
1. The reasonable requirements of the public with respect to the patented invention have not been satisfied,
2. Or the patented invention is not available to the public at a reasonable price, or
3. The patented invention is not worked in territory of India.
• The controller may grant compulsory license if the above conditions are satisfied upon such terms as he may deem fit.
• While granting the compulsory license the Controller shall take into account
1. the nature of invention,
2. time elapsed,
3. ability of applicant to work the invention,
4. Applicant’s efforts for obtaining a license on reasonable terms.
• Above not applicable in certain cases-
1. national emergency, or
2. extreme urgency, or
3. public non-commercial use, or
4. on establishment of a ground of anti competitive practices adopted by the patentee.
• Terms and conditions of Compulsory License
1. Royalty and other remuneration, if any, reserved to the patentee, or other person beneficially entitled to the patent.
2. Patented invention should be worked to the fullest extent by the person to whom the license is granted.
3. Patented article should be made available to the public at reasonably affordable prices.
4. License granted is a non-exclusive license.
5. The right of licensee is non-assignable.
6. License is for the balance term of the patent unless a shorter term is consistent with public interest.
CASE: NATCO Vs. BAYER
• The Controller General of India passed an order of compulsory license against Bayer’s patent on drug Nexavar on March 09, 2012, which is India’s first compulsory license post TRIPS era.
• NEXAVAR- anti-cancer drug, chemically known as Sorafenib tosylate (Patent-holder Bayer Corporation)
• Hyderabad-based Natco had filed an application for issue of compulsory license to manufacture the low-cost version of Nexavar.
• The compulsory license was granted in accordance with the grounds described under section 84 of the Indian Patent Act.
• The license is valid till expiry of the patent in 2021.
• The compulsory license enables Natco to sell the drug at a price not exceeding Rs 8,880 for a pack of 120 tablets (one month's therapy) as against Rs 2,84,428 being the cost of Nexavar sold by Bayer.
• The order also makes it obligatory for Natco to supply the drug free of cost to at least 600 needy patients per year.
• Natco will have to pay 6% royalty on sales to Bayer for the drug on a quarterly basis.