Compulsory Licensing in Patents

The compulsory license is generally granted for the public interest. It is done to make an invention available to the public at an affordable price. The compulsory license in Intellectual property rights is generally done for patents and sometimes in the case of copyrights. This blog focuses on mandatory licensing in patents under The Indian Patents Act, of 1970.

What is a Compulsory Licence?

A license is an agreement signed between two parties which in turn permits the creator and licensee to use a product, and the licensor agrees to the terms and conditions.

A compulsory license is usually done in the public interest. There can be circumstances in which the government can grant the licenses to third parties without obtaining consent from the patent owner. It enables a person or an organization to manufacture intellectual property in a certain circumstance only. It is granted to the third party by the controller only. For the controller to agree to it an application has to be made to him and various conditions have to be satisfied to get compulsory licensing.

This concept was introduced keeping in mind the public’s benefits so that the creations would be available to the public at a low cost. The compulsory licensing is not only limited to patents but it comes under copyrights as well.

Compulsory licenses played a very important role during the COVID-19 pandemic. During the outbreak, people were not able to afford the medicines. There was unavailability of the medicines and essential items. The government had to rely upon the concept of compulsory licensing to provide the society with required essentials. Under it, a third party is granted a license by the authority for manufacturing, selling, and distributing the invention without the permission of the inventor.

People Also Read: Fees and Costs for Divisional Patent Applications

Origin of Compulsory Licensing

The first law to recognize compulsory licensing was The Statute of Monopolies, 1624 which was enacted in the United Kingdom to avoid monopolies in patents. It also aimed at decreasing the impact of the patent as people who were in need had no access and the patented product’s benefits could not be enjoyed.

The Paris Convention also provides for compulsory licensing, which gave compulsory licensing attention. Article 5A of the convention enables members to take legislative measures for granting compulsory licensing.

The Trade Related Intellectual Property Rights (TRIPS) Agreement also provides for compulsory licensing. Its Article 31 provides that the members can use the product or its subject which is patented and they won’t require any permission from the patentee in case of exceptional circumstances. The Doha Declaration also gives green flags to the compulsory licensing under TRIPS. The countries that are a part of the TRIPS agreement have to make provisions for compulsory licensing in their respective laws.

World Trade Organisation allows the export of medicines through compulsory licensing. The annexures and agreement also provide that compulsory licensing can be applied to pharmaceutical products. The TRIPS agreement has laid a foundation for compulsory licensing in the world.

Impact of Compulsory License

• Innovation:

The scope of innovation has increased through compulsory licensing. The developing countries have realised the importance of innovation and to strive to remain in the market which in turn is beneficial for the economy of the country as well. Most of the time an underdeveloped nation used to get a license for a drug rather than spending upon the research and development, the compulsory licenses have motivated them to create their inventions.

• Competition and cost:

The compulsory licensing increases the companies that are producing medicines leading to an increase in the supply. This would in turn provide the product at a low cost. It would lead to having different prices for the patent modules to sustain in the market. All of this in turn would increase the competition.

• Access to Patented Invention:

Compulsory licensing helps get a patent invention easily accessible to all. This does not require any consent from the creator of the invention. Thus a large public can access the products easily.

• Transfer of technology or Patented Product:

The technology can be transferred from one country to another through compulsory licensing. It can be transferred to a country that has no resources nor the capacity to manufacture it.

• Public Interest:

Compulsory licensing is done usually for the interest of the public at large. It enables a product to be available to a large public at very affordable prices. It creates a balance between public interest and intellectual property rights.

People Also Read: What is the PCT (Patent Cooperation Treaty)?

Compulsory Licence under The Indian Patents Act, 1970

A compulsory license for a patent is giving authorization by the government to a third party without the permission of the patent owner to make it, use it, or sell it. A compulsory license for the patent is granted by the Controller and is provided under Chapter XVI, Section 84–94 of the Patents Act, 1970. The various provisions under the act about compulsory licensing are:

Purpose of Granting a Compulsory License

Section 89 provides the purposes for which a compulsory license can be granted. These are:

1. To get the invention commercialized in the country and to work in the market to the full extent and without any form of delay which qualifies as a reasonable practice
2. To prevent any unfair treatment concerning anyone’s rights who is working on developing a patent in India.

Grounds for Compulsory Licence

Section 84 deals with the concept of compulsory licensing. It says that an application has to be made to the controller for compulsory licensing. This has to be made after 3 years have passed since the granting of the patent. It also provides for grounds on which compulsory license can be applied which are:

1. The invention has not been working in the country.
2. The invention is not available at affordable charges.
3. The patented inventions do not satisfy the public requirements.

The application can be made by any person even if he is the holder of the patent and provides any of the above-mentioned grounds. The application also has to provide the nature of the interest of the applicant.

The controller has to be satisfied with the grounds to grant the license. The controller also has to consider various other things as per section 84(6) for granting the license. These are:

1. Nature of invention
2. Time elapsed since the grant of the patent
3. Measures taken to use the invention by the patentee
4. How the patent will benefit the public
5. If the risk can be undertaken by the applicant
6. What efforts have been put up to obtain the license?
7. Section 84(7) provides that reasonable requirements of the public will not be considered as satisfied if:
8. There has been bias based on trade or industry already existing
9. No demand for the patented product
10. Biases towards the startups or growth of business.
11. There is an inadequate supply of patented products to be exported.
12. A condition has been imposed on the usage, manufacturing, and sale of the patented products.
13. Not used in India Commercially to full extent at a reasonable price.
14. The patented invention is prevented from being used by any foreign country.

Procedure for the Grant of Compulsory License

• The procedure of compulsory license is provided under section 87 of the act. The controller grants an application. If an application is made to the controller and he is satisfied with the grounds, the applicant will have to serve a notice to the patentee. After that, the application has to be published in the official journal.
• A notice has to be given in case of an objection to the controller within the time which has been prescribed. This notice should contain the objection’s grounds. The controller is obligated to let the applicant know about the objection. The opportunity is given to both parties to give their responses before the controller decides the application.

Revocation of Patents

Section 85 provides for the revocation of patents by the controller. The reason for revocation can be nonworking. An application can be filed to the controller by any person or government to revoke the patent.

This application has to be made after 2 years have passed from the date of grant of compulsory license. It can be revoked on the following grounds:

1. The patented invention is not being used in the country.
2. The public requirements are not satisfied.
3. The patent is not available at affordable prices.

The application of revocation should also contain particulars as well as the nature of interest. The controller must be satisfied with above mentioned grounds to revoke an application. This application has to be decided within one year from the date presented to the controller. 

Termination of Compulsory Licenses

• The termination of compulsory licenses is provided under section 94 of the act. This can be done through an application when the controller is satisfied that the circumstances due to which the compulsory license was granted do not exist anymore. The application can be made by the patentee or any person who has a title or interest in the license. 
• If such an application is made by any other person an objection can be raised. While the application is granted by the controller he has to look into whether the interest of the person having a license is affected or not.

Power of Controller

The controller is provided power under section 88 of the act.  The controller can:

1. The grant of licenses can be ordered to the applicant in case there has been an application made providing that there has been bias regarding manufacturing, use, or sale.
2. Can order to amend an existing license.
3. In case a patentee holds two or more patents and an application is submitted for a compulsory license with the reasonable requirements of the public being not fulfilled the controller can order licensing of other patents in case he is satisfied that the applicant cannot work without infringing any other patent and patent include technical advancements which are significant economically.
4. The licensee as per this section can make an application to the controller for revising the terms and conditions. This can be made on the ground that the terms and conditions have been burdensome on the licensee and he is suffering a loss. It is made after 12 months of use of the invention.

Section 86 gives the controller the power to adjourn the hearing of applications if they have not been granted for more than 12 months. The application has to state invention has not been patented in India and the controller has been satisfied that the patent was sealed and the invention did not work up to a reasonable practice.

In case it has been confirmed that the invention was not worked upon due to any laws be it state or central the adjournment period will be recorded from the date it was prevented from working.

Terms and Conditions of Compulsory Licences

Section 90 of the act provides the terms and conditions of compulsory licensing. The controller must try to secure:

1. There are reasonable royalty and remuneration
2. To work to the full extent on patented inventions with profit.
3. Patented products are available at low costs
4. Granting of a nonexclusive license
5. The right of nonassignable license
6. License granted to supply in the Indian market
7. Granting the license for a term that is balanced unless a short term is consistent with the public interest
8. In the case of semiconductor technology, the license is intended to allow the public to work for non-commercial purposes only.
   To address anti-competitive practices, a license is being permitted for the export of patented products.

This section also states that the licensee won’t get authorization by a license for importing an article which is a patented or patented process to make a product from a foreign country resulting in an infringement of the rights of the patentee.

Compulsory Licence for Export of Patented Pharmaceutical Products

Section 92 of the act provides for special cases when the government notifies for the compulsory licenses grant. The government can grant in the case of:

1. National emergency
2. Extreme urgency
3. Non-commercial use by the public

An application has to be submitted to the controller who will grant the license and as well as settle the terms and conditions. The controller has to be sure that the product that is patented is available at low costs and that the patentees can enjoy a reasonable advantage.

The controller does not have to follow section 87 of the act for the procedure in case of national emergency or non-commercial use which also includes crises related to public health like AIDS, HIV, Tuberculosis, Malaria, or other epidemics.

Section 92 A provides compulsory licensing for the export of pharmaceutical products that are patented. Deals with compulsory licensing in the case of pharmaceutical companies. It is basically to use the public health sectors. It says that to address problems of health care in countries that cannot manufacture it easily export can be done.

Conclusion

Compulsory licenses play a very important role in the pharmaceutical business. This covers the patents thus being governed by the Indian Patents Act, of 1970. The pharmaceutical business requires a compulsory license as in case of an epidemic there would be a requirement for medicines in the world, the compulsory licenses would help in making it available to the consumers that too at an affordable price.

This was seen by all of us during the COVID-19 pandemic which had hit us recently. The governments of various countries have granted compulsory licensing to ensure that the population is protected from the epidemic. 

Frequently Asked Questions on Compulsory Licensing in Patents

Q1. What is a Patent?

Ans1.  Patents are a form of intellectual property rights that promote innovation amongst the masses. In this, an inventor of anything is given a right of authority in sovereign form. It is a legal document that protects the inventor’s invention from misuse by any other person.

Q2. What is a License?

Ans2. A license is an agreement that is signed between two parties which in turn permits the usage of a product by the creator and the licensee as well and the licensor agrees to the terms and conditions.

Q3. What is a Compulsory License?

Ans3.  A compulsory License authorized by the government allows the company or an individual seeking another’s intellectual property to use it without having to seek the consent of the owner/ the right holder by paying a predetermined fee for the license. 

Q4. What is licensning in IPR?

Ans4. In an IPR license, the licensee is permitted to use the intellectual property but is subject to terms and conditions. These terms and conditions are laid down in the license agreement that both parties negotiate and sign.

Q5. Which Article of the Paris Convention governs compulsory licensing?

Ans5. Article 5A of the convention enables members to take legislative measures for granting compulsory licensing. 

Q6. Does compulsory licensing grant exclusive rights to a patented product?

Ans6. No, compulsory licensing grants non-exclusive rights to a third party to use, manufacture, or sell a patented product. The exclusive rights remain with the patent holder or the owner of the patented product. 

Q7. What are the grounds for compulsory licensing?

Ans7. The grounds on which compulsory license can be applied are:

1. The invention has not been working in the country.
2. The invention is not available at affordable charges.
3. The patented inventions do not satisfy the public requirements.

Q8.  Does granting a compulsory license require the consent of the patentee?

Ans8. No, a compulsory license is granted by a competent authority, i.e., the Controller, and does not require any consent or permission from the patentee.

Q9. Can a compulsory license be granted for a copyright?

Ans9. Yes, Section 31-31B of the Copyrights Act, 1957, deals with the compulsory license in the case of copyrighted works. These provide for:

1. Section 31 provides for compulsory license in cases of work withheld from the public.
2. Section 31A deals with the grant of compulsory licenses in cases of published and unpublished works.
3. Section 31B deals with compulsory licenses granted for the benefit of disabled persons. 

Q10. Can a compulsory license be granted for trademarks?

Ans10. No, there is no provision for the grant of compulsory licenses in the case of trademarks.