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What is the Concept of Patent Compulsory Licensing?

What is the Concept of Patent Compulsory Licensing?
Karan Singh
| Updated: May 15, 2021 | Category: Patent

In simple words, Patent compulsory licensing is an approval given to a third party by the Government to sell, make, or use a specific product or use a specific process that has been patented without the requirement of the patent owner’s permission. The provisions concerning compulsory licensing are given in the Indian Patents Act, 1970[1] and in the TRIPS Agreement at the global level. Although this works against the Patent owner, usually compulsory licenses are only considered in some cases of health and national emergency. There are some vital conditions that should be fulfilled if the Government desire to issue a compulsory license in favour of someone.

Under the Patents Act, 1970, the provisions of compulsory licenses are precisely prescribed under Chapter XVI. The circumstances that need to be fulfilled are prescribed under Section 84-92 of the Indian Patents Act, 1970. Scroll down to check more information regarding Patent Compulsory Licensing.

Section 84: Patent Compulsory Licensing

After the expiration of 3 years from the date of Patent Registration, any individual interested can file an application to the Controller for the issuance of compulsory license on Patent of the following grounds, namely:

  • That the patented creation or an invention is not available to the general public at an affordable price;
  • The sensible requirements of the public concerning the patented invention have not been satisfied;
  •  That the patented creation or an invention is not worked in the Indian boundary.

According to Section 84, any individual interested or already the owner of the license under the Patent Act can request the Controller for the issuance of compulsory license on the expiration of 3 years, when the aforementioned conditions are satisfied.

However, compulsory licensing may also be granted when:

  • Section 92 A – For exports, under exceptional conditions;
  • Section 92A – In the case of national crisis, the extreme necessity of public  non-commercial use by the notification of the Central Government of India;
  • Section 92 A (1) – To a nation that has enough or no manufacturing power in the sector of pharmaceutical to address public health.

Moreover, such licenses are also issued by the Controller under Section 92, as stated in the notification furnished by the Central Government if there is either a national crisis or extreme necessity or in case of public non-commercial use.

The Controller considering some more factors such as the invention’s nature, the potential of the applicant to use the product for public advantage and the reasonability, but the ultimate discretion lies with him to issue the compulsory license. Even after compulsory licensing is granted to a third party, the owner of a Patent still has rights over the Patent, consisting of a right to be paid for the product’s copies made under the compulsory licensing.

Global Viewpoint on Patent Compulsory Licensing

This occurrence of licensing is a massively debated issue. Many developing nations are giving significance to the compulsory license because of the deficiency and overpriced of the medicines, and they are endlessly granting more and more Patent compulsory licenses. The developed nations of the United States of America (USA), Europe are opposing this viewpoint as it would make innovation hard for the pharmaceutical entities.

The first case of Patent Compulsory License in India: The first case of licensing was granted by the Indian Patent Office in 2012 to an Indian entity known as Natco Pharma for the common production of Bayer Corporation’s Nexavar. Al the three situations of Sec 84 were satisfied that the public’s affordable requirement was not satisfied, and that it was not available at a reasonable price and that the patented invention was not worked across India.

Such medicines are used for treating kidney & liver cancer and one month’s worth of dosage price of around Rs. 2.8 lakh. Matco Pharma provided to sell it around for Rd 9000, making this certainly lifesaving drug simply accessible to all society’s party and not just the rich people. The Government took this decision for the betterment of the general public. But, it was heavily arraigned by the pharmaceutical companies as they felt the compulsory license shouldn’t have been given.

But, Natco Pharma is paying the royalties to Bayer at 6% of the rate of all sales on a quarterly basis as per the guidelines prescribed by the UNDP (United Nations Development Programme). In January 2013, the Indian Ministry of Health approved three anti-cancer drugs, trastuzumab, dasatinib, and ixabepilone, for compulsory licenses. This will permit the Government to sell drugs at a notably lower cost and will also enable the people who can’t afford the drugs originally access to such drugs.

What are the Impacts of Patent Compulsory Licensing?

Following are some areas that will be impacted by the compulsory license:

What are the Impacts of Patent Compulsory Licensing?
  1. Competition and Price: Compulsory Licensing will raise the number of companies manufacturing generic medicines. Therefore, the supply of medicines will go up, and the price will come down. This will also force the inventor nations to introduce pricing of their Patent Module distinctively so that they can stand on the market.
  2. Innovation: In underdeveloped nations, the innovation of pharmaceutical entities will be less or low as they will be more dependent on generic drugs. They will prefer getting the compulsory license to a generic drug rather than funding R&D individually, which is often a very costly thing. Further, research-based pharmaceutical industries will not launch Patent Module in the advancing nations as there is always the risk of Patent losing and losing money in research.
  3. Patients: Patients will get medicines at a remarkably lower rate. Also, the big pharmaceutical companies often introduce plans such as free access to medicine to safeguard their Patents in the advancing nations.

Conclusion

The provisions of compulsory licensing should be used reasonably as it is an irregularity and flexibility to the common Patent Rule. The provisions and comes mid-way; neither full Patent security is granted nor is it opposed altogether. It directly affects innovation funding, and unrestricted use of this provision may result in international pharmaceutical companies being unsure of introducing new medicines in other nations. Therefore, the companies have to fix the price of their patented module as per their nation’s financial status if they want to safeguard their products from compulsory licensing. This licensing has become the desire for economically challenged patients in underdeveloped nations. India requires such provisions owing to the financial situation of the majority population. However, the challenge is that, on the one hand, it has to obey the worldwide standards of Patent protection, and on the other side, it has to protect public health.

Read our article: A Complete Guide on Patent Filing Procedure in India

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Karan Singh

A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.

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