In the latter part of the 19th century new inventions in the field of art, process, method or manner of manufacture, machinery, apparatuses and other substances, produced by manufacturers were on the increase and the inventors became very much interested that the inventions done by them should not be infringed by anyone else by copying them or by adopting the methods used by them. To save the interest of investors the then British rulers enacted Indian Patents and Design Act, 1911 (2 of 1911). Since then due to substantial changes in the political and economic conditions of the country, it was found desirable to enact a comprehensive law on the subject. The Patent Bill, 1953 was introduced in the Lok Sabha on 7th December 1949 but it lapsed on the dissolution of the First Lok Sabha. In 1965 the Patents Bill, 1965 was moved in the Parliament but could not be proceeded with for want of time and eventually lapsed with the dissolution of the Third Lok Sabha. The Patents Bill was again introduced in the Parliament.
BACKGROUND AND REASON
The existing Indian Patents and Designs Act was enacted in 1911 and since then there have been substantial changes in the political and economic conditions of the country. The need for comprehensive law so as to ensure more effectively that patent rights are not worked to the detriment of the consumer or to the prejudice of trade or the industrial development of the country was felt as early as 1948 and in that year the Government appointed the Patents Enquiry Committee to review the working of the patents law in India. The Committee, to review its finally in 1950. The Patent Bill 1953 based largely on the United Kingdom Patents Act, 1949 and incorporating some of the recommendations of the Committee was introduced in the Lok Sabha on 7th December 1953. The Bill, however, lapsed on the dissolution of the First Lok Sabha.
In 1957, the Government of India appointed Shri Justice N. Rajagopala Ayyanagar to examine afresh and review the patents laws in India and advise the government on changes necessary. The Judge submitted a comprehensive Report on Patents Law Revision in September 1959. The Patent Bill, 1965 based mainly on the recommendations contained in his detailed report and incorporating a few more changes in the light of further examination made particularly with reference to patents for food, drugs and medicines, was introduced in the Lok Sabha on 21st September 1965. The Bill was referred on 25th November 1965 to a Joint Committee of Parliament. The Joint Committee, after a careful consideration of the matter, adopted a number of amended Bill, was presented to the Lok Sabha on 1st November 1966. The Patents Bill, 1965 as reported by the Joint Committee was formally moved in the Lok Sabha on 5th December 1966, but could not be proceeded with for want of time and eventually lapsed with the dissolution of the Third Lok Sabha on 3rd March 1967.
The present Bill contains comprehensive provisions to amend and consolidate the existing law and also contains amendments/recommendations by the Joint Committee referred to above. The notes on clauses explain the provisions of the Bill, wherever necessary.
The Patents Bill having been passed by both the Houses of Parliament received the assent of the President on 19th September 1970. It came on the Statute Book as The Patents Act, 1970.
LICENSING OF PATENTS
Patents are monopoly rights and intangible by nature. Section 48 of the Indian patents act, 1970 deals exclusively with the rights of patentees which prevents the third parties, who do not have the consent of the patentee, from the act of making, using, offering for sale, selling or importing for those purposes the patented product in India. Similarly, the act also prevents the third parties, who do not have the consent of the patentee, from the act of using that patented process, and from the act of using, offering for sale, selling or importing for those purposes the product obtained directly by that patented process in India.
In certain cases, the patentee may not have enough resources, business acumen or technical know-how for carrying out one’s invention. In such cases licensing offers the patentee to authorize the person whom the license has been given to exercise the patent rights under certain circumstances. Licensing is considered as a lucrative way of raising finances. The person granting the license is referred to as the licensor and the person acquiring the license is referred to as licensee. Licensing is also referred to as technology transfer. The terms and conditions for licensing may be followed as laid in the licensing agreement which should take into account the interest of both the parties. To put it simply, the merchandise sellers are given the license by the patentee to use one’s brand.
The relevant provision with this regard is the section 84 of the Act and the said section is read as:
84 Compulsory licences. –
(1) At any time after the expiration of three years from the date of the 170 [grant] of a patent, any person interested may make an application to the Controller for grant of compulsory licence on a patent on any of the following grounds, namely:-
(a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or
(b) that the patented invention is not available to the public at a reasonably affordable price, or
(c) that the patented invention is not worked in the territory of India.
(2) An application under this section may be made by any person notwithstanding that he is already the holder of a licence under the patent and no person shall be estopped from alleging that the reasonable requirements of the public with respect to the patented invention are not satisfied or that the patented invention is not worked in the territory of India or that the patented invention is not available to the public at a reasonably affordable price by reason of any admission made by him, whether in such a licence or otherwise or by reason of his having accepted such a licence.
(3) Every application under sub-section (1) shall contain a statement setting out the nature of the applicant’s interest together with such particulars as may be prescribed and the facts upon which the application is based.
(4) The Controller, if satisfied that the reasonable requirements of the public with respect to the patented invention have not been satisfied or that the patented invention is not worked in the territory of India or that the patented invention is not available to the public at a reasonably affordable price, may grant a licence upon such terms as he may deem fit.
(5) Where the Controller directs the patentee to grant a licence he may as incidental thereto exercise the powers set out in section 88.
(6) In considering the application filed under this section, the Controller shall take into account,-
(i) the nature of the invention, the time which has elapsed since the sealing of the patent and the measures already taken by the patentee or any licensee to make full use of the invention;
(ii) the ability of the applicant to work the invention to the public advantage;
(iii) the capacity of the applicant to undertake the risk in providing capital and working the invention, if the application were granted;
(iv) as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit:
Provided that this clause shall not be applicable in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on the establishment of a ground of anti-competitive practices adopted by the patentee, but shall not be required to take into account matters subsequent to the making of the application. 171 [ Explanation .-For the purposes of clause (iv), “reasonable period” shall be construed as a period not ordinarily exceeding a period of six months.]
(7) For the purposes of this Chapter, the reasonable requirements of the public shall be deemed not to have been satisfied-
(a) if, by reason of the refusal of the patentee to grant a licence or licences on reasonable terms,-
(i) an existing trade or industry or the development thereof or the establishment of any new trade or industry in India or the trade or industry in India or the trade or industry of any person or class of person trading or manufacturing in India is prejudiced; or
(ii) the demand for the patented article has not been met to an adequate extent or on reasonable terms; or
(iii) a market for the export of the patented article manufactured in India is not being supplied or developed; or
(iv) the establishment or development of commercial activities in India is prejudiced; or
(b) if, by reason of conditions imposed by the patentee upon the grant of licences under the patent or upon the purchase, hire or use of the patented article or process, the 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; or
(c) if the patentee imposes a condition 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; or
(d) if the 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; or
(e) if the 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 by-
(i) the patentee or persons claiming under him; or
(ii) persons directly or indirectly purchasing from him; or
(iii) other persons against whom the patentee is not taking or has not taken proceedings for infringement. ] (1)
As per this section, any person who is interested or already a holder of the license under the patent can make a request to the controller for grant of compulsory licence on patent after three years from the date of grant of that patent on the existence of conditions mentioned in the section 84 of the patents act, 1970. The compulsory licence will be granted on the following grounds:
• That the reasonable requirements of the public with respect to the patented invention have not been satisfied or,
• That the patented invention is not available to the public at a reasonably affordable price or,
• That the patented invention is not worked in the territory of India.
These are the few grounds on which the compulsory licence will be granted. If the product is not available to the public at a reasonably affordable price, if the public is not satisfied with the patented invention or if the product is not available in the territory of India.
Section 92 of Patent Act, 1970
92 Special provision for compulsory licences on notifications by Central Government. –
(1) If the Central Government is satisfied, in respect of any patent in force in circumstances of national emergency or in circumstances of extreme urgency or in case of public non-commercial use, 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, and thereupon the following provisions shall have effect, that is to say-
(i) the Controller shall on application made at any time after the notification by any person interested grant to the applicant a licence under the patent on such terms and conditions as he thinks fit;
(ii) in settling the terms and conditions of a licence granted under this section, the Controller shall endeavour to secure that the articles manufactured under the patent shall be available to the public at the lowest prices consistent with the patentees deriving a reasonable advantage from their patent rights.
(2) The provisions of sections 83, 87, 88, 89 and 90 shall apply in relation to the grant of licences under this section as they apply in relation to the grant of licences under section 84.
(3) Notwithstanding anything contained in sub-section (2), where the Controller is satisfied on consideration of the application referred to in clause (i) of sub-section (1) that it is necessary in-
(i) a circumstance of national emergency; or
(ii) a circumstance of extreme urgency; or
(iii) a case of public non-commercial use,
which may arise or is required, as the case may be, including public health crises, relating to Acquired Immuno Deficiency Syndrome, Human Immuno Deficiency Virus, tuberculosis, malaria or other epidemics, he shall not apply any procedure specified in section 87 in relation to that application for grant of licence under this section: Provided that the Controller shall, as soon as may be practicable, inform, the patentee of the patent relating to the application for such non-application of section 87.] (2)
This section deals with other grounds on which the compulsory licence will be granted. These are special provision for compulsory licences on notifications by central Government. Government grants compulsory licences in the following grounds:
• For exports, If the product is used for exporting to another country then the government can grant licenses but this is only in exceptional circumstances.
• If there is a national emergency, this is the case where the product is needed on an urgent basis like in war or in a health crisis. For example, the licence is granted to the companies of manufacturing guns at the time of war or licenses granted to drug companies to manufacture the patented drug at the time of health crisis.
THE ADVANTAGE OF A LICENSE:
• A doormat project may be converted into a revenue-generating product.
• Most of the licensees believe that it is more beneficial to have a license than to own a patent as they enjoy the full commercial advantage of the patent.
• An already generated product is available without an upfront investment.
• Numerous distribution channels are available thus the targeted consumers are huge in number.
• Enhanced product pipelines.
• With more the licensee the better the competition.
THE DISADVANTAGE OF A LICENSE:
• In case of an exclusive license, the patent owner tends to lose the hold on one’s invention.
• The chances of making the licensee a competitor are manifold.
• As the product is sold under the licensee’s brand name, dilution of quality could be a major issue.
• Sharing may also lead to a conflict of interest between the licensee and the licensor.
• Licensing is accompanied by uncertainty as it involves two or more parties.
• Licensing may be broadly classified as exclusive, and non-exclusive. We will be dealing with compulsory licensing as a separate segment in our next series.
TYPES OF DIFFERENT LICENSES
- Exclusive licensing literally puts the licensee in the shoes of the patent owner. The licensee is entitled to exclude all other persons inclusive of the patentee from the right to use the invention. Upon grant of the exclusive license, even the patentee cannot sell the goods in the territory where the licensee has acquired an exclusive license.
- Non-exclusive license gives the same right to more than one licensee. This implies that one licensee may exploit the invention but along with him others who have been given the license for the same product may be eligible for equal exploitation.
- Sole license is a type of exclusive license where the licensor agrees not to share the license with other licensees but would retain the right to make use of the patent. In simple terms, the licensor is entitled to compete with the licensee.
- Express license: as the name suggests an express license is the one made in expressed terms i.e. the conditions and terms are explicitly stated in a document. An express license is not valid until it is put in a written format accompanied by an application for obtaining it is filed with the controller.
- Implied License: The licensing for such inventions is implied from the circumstances. It is an unwritten license. Every patented article is accompanied by an implied license. In case an express license is in force an implied license cannot be cited as a right.
- Territorial jurisdiction also forms an important part of the licensing as the territorial jurisdiction decides the geographical limits under which the licensee can exploit the patents. (3)
HOW COMPULSORY LICENSING IS HELPING INDUSTRIES TO GROW
• Availability of goods and services at affordable prices to the developing and underdeveloped countries.
• The local industries which obtain the compulsory license for the patented goods can produce employment for thousands of workers and therefore reduce unemployment.
• In order to advance in science and technology, underdeveloped countries need maximum access to intellectual property of advanced nations.
• More than 80% of patents in developing and underdeveloped countries are owned by citizens of developed countries. So, Compulsory licensing will help the underdeveloped countries to have access to the patented products.
IMPACTS OF COMPULSORY LICENSING
The areas which will be impacted by the compulsory license are as follows:-
1. Innovation – In Underdeveloped countries, the innovation of pharmaceutical companies will be less as they will be dependent on generic drugs. They will prefer getting the compulsory license to a generic drug rather than funding the Research & Development separately, which is often a very costly thing. Moreover, research-based pharmaceutical companies will not launch patent module in the developing countries as there is always the risk of losing the patent and losing money in research.
2. Competition & Cost- Compulsory licensing will increase the number of companies producing generic medicines. Hence the supply will go up, and the cost will come down. This will also force the innovator countries to introduce differential pricing of their patent module so that they can stand on the market.
3. Patients- Patients will get medicines at a significantly cheaper rate. Also, the big pharmaceutical companies often introduce plans like free access to medicine to protect their patents in the developing countries. (4)
THE FIRST CASE OF COMPULSORY LICENSING IN INDIA
Natco Pharma Ltd. is the first company to file for compulsory licensing for producing the generic version of Bayer’s Corporation’s patented medicine Nexavar, used in the treatment of kidney and liver cancer. In India, the patent office in 2012 granted the compulsory license to Natco Pharma for the same drug. It was argued by the Natco Pharma that the public does not have access to this drug at an affordable price and the patented invention was not worked in India. All the 3 conditions of sec 84 were fulfilled that,
• The reasonable requirements of the public were not fulfilled
• That it is not available at an affordable price
• The patented invention was not worked around in India.
So, Natco applied for the compulsory license under section 84 of the Patent Act for Bayer’s patented drug Nexavar. Nexavar was available by the Bayer Corporation for $ 6299 for a month’s course. Natco Pharma proposed that it the same drug will be available by the name of Sorafenib Tosylate for just $196. It was proposed that it will benefit the whole population of India which is in millions. The government decided on the general public health and granted the compulsory license to the Natco Pharma. (5)
There should be the license of Patents in order to protect the interest of the owner of the Intellectual Property and if it is not done then it will defeat the main purpose of the act and also not meet the said provision.
Compulsory licensing is important for underdeveloped or developing countries. As the resources which are not available in a particular, the country can be a necessity for that country. Medicine is a necessity for the society and if a patented drug is available in a country but is very expensive than a normal person cannot afford that drug then the government of that country has to do something for the people who cannot afford it. Here, the compulsory license role comes in. Compulsory licenses will make the similar product available to the people who cannot afford that drug.
TRIPS agreement for the public health was the first step by WHO to protect the people from sickness and diseases which is common in countries but the medicine is not available
A license always involves remuneration referred to as royalty which is paid by the licensee to the licensor for having used the invention. Royalty is also sometimes referred to as a profit percentage. The royalty may be paid at once, maybe a fixed amount paid at regular intervals or may be calculated as per the services and paid for certain activities of the licensee.
The term of licensing followed by the termination stands an important aspect of licensing. Not only the agreement should have the time period when the license is active but also post-termination contract too. The license may be granted not just for granted patents, but also to the patented application.
Licensing literally introduces an invention to the markets. Naïve inventors are at a benefit when it comes to licensing as their product gets an economic cushion. IP due diligence is essential for both the parties to engage in licensing. Licensing is a most lucrative way of earning in modern-day intellectual property scenario and is a considered as a vital component for a business strategy and economic development.
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