Compulsory licensing in the light of novartis ag case and Bayer Corp case

Jai Narain Vyas University, Jodhpur
S.M.K Faculty of Law (Five Years’ Integrated Law Course)
Academic Year 2017-18
Moot Problem on “Compulsory licensing in the light of Novartis AG
Case & Bayer Drug Case”.
Submitted To: Submitted By:
Mr. Vinod Choudhary Sandeep K Bohra
Subject: Trade Law B.B.A LL.B. 10TH
Semester
Roll No.: 15
Date of Submission:
May 2018

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Compulsory licensing in the light of Novartis AG Case & Bayer Drug Case
Preface
The Trade Law is a vehicle enables the justice dispensation mechanism to catch up
with fast paced rapid changes in the world. It also requires fast pace evolution and
subject specific tailoring so as to take care of new situation, new conventions, and
new modes of apply for license. The Promotion of accuracy in the decision making
process is the primary target meant to means to achieve through the Trade Law. In
the law of trade law, Modes of license with Indian and International law relating to
TRIPS agreement. Some primary authorities, such as WTO , define a Compulsory
license in more narrow terms, e.g.as " when the authorities license companies or
individuals other than the patent owner to use the rights of the patent — to make,
use, sell or import a product under patent (i.e. a patented product or a product made
by a patented process) — without the permission of the patent owner. Allowed under
the WTO’s TRIPS (intellectual property) Agreement provided certain procedures and
conditions are fulfilled.

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Table of Contents
I. Introduction to Compulsory Licensing in Patent Law.............................................. 4
II. Historical Background of Compulsory Licensing in India ................................... 6
III. Compulsory Licensing its meaning and Scope.................................................... 10
Features of Compulsory Licensing.............................................................................. 10
When it granted............................................................................................................. 11
Conditions for granting CL .......................................................................................... 11
Considerations for granting Compulsory License...................................................... 11
Revocation of Patents ................................................................................................... 11
Procedure after filing for Compulsory License .......................................................... 12
Termination of Compulsory License ........................................................................... 12
IV. Difference between Voluntary License and Compulsory License ..................... 13
V. Compulsory licenses under International Law.................................................... 14
A. Under the Paris convention for the Protection of Industrial Property (1883)14
B. Under Berne Convention for the Protection of Literary and Artistic Works
(1886) ............................................................................................................................. 15
C. Under TRIPS Agreement on compulsory licensing of pharmaceuticals (1995)
16
Compulsory License as TRIPS Flexibility................................................................... 16
D. Scope of Compulsory License through the Doha Declaration®..................... 17
VI. Compulsory License under Indian Patent Law Provisions................................. 19
A. Procedure for grant of compulsory license under section 84:........................ 19
B. Use of Compulsory License in circumstances of national emergency, extreme
urgency, or public non-commercial use...................................................................... 20
C. Use of Compulsory License by the Government ............................................. 21
VII. Powers of Controller in granting Compulsory Licensing ................................... 23
Power of Controller to adjourn applications for compulsory license....................... 25
VIII. Novartis AG Vs. Union of India and the Compulsory License Regime in India
26
Brief Facts .................................................................................................................. 26
Issues before Supreme Court ................................................................................... 27
Observations by the Supreme Court........................................................................ 27
IX. NATCO Pharma LTD. Vs. Bayer Corporation and the Compulsory License
Regime in India................................................................................................................. 28
X. Conclusion.............................................................................................................. 30

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“Compulsory licensing in the light of Novartis AG
Case & Bayer Drug Case”
I. Introduction to Compulsory Licensing in Patent Law
Patent protection, despite being contradictory to competition law and human rights
law, has been accepted worldwide as a necessary evil in order to foster innovation.
However, such situations may arise when this exclusive right to exploit the creation
may not stand the test of public interest and may be required to be breached in order
to protect human rights. For instance, a patent on a lifesaving drug may be diluted to
the detriment of the patent holder in case of an outbreak of an epidemic.
“Compulsory licensing is a license issued by a state authority to a government
agency, a company or other party to use a patent without the patent holder’s
consent”.1 The philosophy underlying compulsory licensing is therefore based on an
often repeated saying “Necessity is the mother of invention”. Such situations may
arise where diluting a patent becomes inevitable. The flexibility is therefore provided
under law to break the patent when need arises. This flexibility is particularly
important for third world countries to deal with public health crisis when access to
patented drugs becomes unaffordable and patent needs to be diluted to make generic
copies of the needed drugs.2
Compulsory License as a mechanism is allowed by the Agreement on Trade Related
Aspects of Intellectual Property Rights (TRIPS). The international agreement which
establishes intellectual property rights, including patent rights. Patent protection can
be overcome through the use of Compulsory Licenses, which enables other
companies to produce a patented product without the permission of the patent
holder.3 A compulsory license creates an exception to the monopoly created by
patent protection and acts as a legal counterweight to combat the adverse effects4 of
1 Steven D. Anderman The interface between Intellectual Property Rights and Competition
Policy (Cambridge University Press, 2007)
2 Gustavo Ghidini, Intellectual Property and Competition Law – The Innovation Nexus
(Elward Elger Publication, 2006)
3 Vishwas H Devaiah - TRIPS & Public Health
4 Vishwas H Devaiah - TRIPS, patents and public policy: A pot of gold and a tale of woes!

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patents. TRIPS empowers the State to make use of Compulsory License according to
its own discretion. Thus, the State can rightfully resort to the use of Compulsory
License in order to meet health requirements of the country’s population.
On 9th March 2012, India issued its first compulsory license to a local generic
pharmaceutical company, Natco, to produce a generic version of the patented drug
sorafenib tosylate, (Brand name-Nexavar),5 used for the treatment of kidney and
liver cancer. The compulsory license allowed the generic company to manufacture
and sell the drug at a fraction of the cost of the patented version.6 The move has been
praised by access to medicines advocates both within India and internationally. Not
only will the Compulsory License make sorafenib tosylate more accessible and
affordable, but hopefully it will set a precedent for the grant of licenses for other life-
saving medicines in the future.7
The role Compulsory Licenses are to ensure access to affordable medicines and in
light of expansion of the patent regime, developing and least developed countries
have issued Compulsory Licenses to help improve accessibility to affordable
medicines. Further it also discusses the obstacles against the use of Compulsory
Licenses in developing countries.8
5 Dr. Peter Drahos - Access To Medicines: After Doha
6http://infochangeindia.org/200405096068/Trade-Development/Intellectual-Property-
Rights/TRIPS-and-public-health.html
7 Ervaas van Thiel - Public Health vs. Intellectual Property
8 Sangeeta Shashikant - Rushing through a "permanent solution" for TRIPS and Health

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II. Historical Background of Compulsory Licensing in India
India’s first Compulsory License was granted by the Patent Office to Natco Pharma
Ltd. for producing generic version of Bayer Corporation’s patented medicine,
sorafenib tosylate used in the treatment of liver (Hepato cellular carcinoma [HCC])
and kidney cancer (Renal cellular carcinoma [RCC]) at advanced stages. Bayer was
granted a patent for sorafenib tosylate in the year 2007. Bayer marketed this
medicine in India by pricing it at Rs. 2, 84,000 per patient per month.9
On 6th December, 2010 Natco had requested Bayer for a voluntary license to
manufacture and sell Bayer’s patented drug Nexavar in India at a price of less than
Rs.10,000/per month of therapy as against the price of Rs.2,80,428/per month that
was being charged by Bayer. As Bayer denied to grant a voluntarily license to Natco
and rejected Natco’s request,10 Natco made an application to the Patent Controller
requesting the grant of a compulsory license i.e. without Bayer’s consent, to
manufacture and sell Bayer’s patented drug sorafenib tosylate in India.
According to Section 8411
Compulsory licences. -
(1) At any time after the expiration of three years from the date of the [grant] of a
patent, any person interested may make an application to the Controller for grant of
compulsory licence on 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, or12
(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.
9 http://www.wto.org/english/res_e/booksp_e/ddec_e.pdf
10 Commercialisation of Health Care : Global and Policy responses
11 Indian Patent Act, 1970.
12 http://www.wto.org/english/theWTO_e/minist_e/min01_e/mindecl_trips_e.htm - Declaration
on TRIPS & Public Health

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(2) An application under this section may be made by any person notwithstanding
that he is already the holder of a license 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 invention13 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 field 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:
13 http://www.cid.harvard.edu/cidtrade/Papers/vanthiel.pdf

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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 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.
[ 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 license or licenses 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 persons 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 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 licenses
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 licenses under the patent to
provide exclusive grant back, prevention to challenges to the validity of patent or
coercive package licensing; or

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(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. ]
In other words, any person interested, may make an Application for the grant of
Compulsory License after 3 years from the date of grant of Patent on the grounds
that:14
i. the reasonable requirements of the public have not been satisfied, or
ii. the patented invention is not available to the public at reasonable
affordable price, or
iii. the patented invention is not worked in the territory of India.
Thus, Natco’s application under section 84 for Compulsory License was considered
by the Patent Controller. Under section 84, while any one of the above three grounds
can suffice for the grant of Compulsory License, the Patent Controller decided
against Bayer on all the three grounds.15
14 Intellectual Property Rights: Theory & Indian Practice by Garima Gupta & Avih Rastogi
15 Changes to India’s patent law – One step closer to TRIPS compliance by Edward Heinkein

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III. Compulsory Licensing its meaning and Scope
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.16 They are 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.17
WTO defines ''Compulsory Licensing as a process wherein government allows
someone else to produce the patented product or process without the consent of the
patent owner''.
The provision of compulsory license (CL) enables the government to balance the
rights of the patent holder with its obligations to ensure:
 working of patents,
 availability of the products at a reasonable price,
 promotion and dissemination of technological invention and
 protection of public health and nutrition.
The Key Objective of granting compulsory license is to prevent the abuse of
monopoly granted.
Features of Compulsory Licensing18:
 To save lives of the populace by ensuring accessibility of drugs at affordable
prices.
 To break up monopolies and cartels, which are some of the abuses of patent
rights.
 To ensure social justice in accordance with constitutional mandate.
 Fostering innovation in pharmaceutical industry
 To establish the primacy of national health over any trans-national intellectual
property rights.
16 B.L. Wadera, Law relating to Patents, Trademarks, Copyright, Designs & Geographical
Indications (Universal Law Publising Co Ltd, New Delhi, 2nd edn., 1999).
17 Intellectual Property Law (3rd Edition) by Lionel Bentley & Brad Sherman
18 Patent Reform in India by Dr. Partha Pratim Mitra

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 Need of Indian researchers to innovate according to India’s needs with some
modifications to these patents.
When it granted19: Compulsory License may granted-
 After expiration of three years of filing of patent, or
 By the Controller for grant of compulsory license.
Conditions for granting CL20: Followings are the conditions in which the Compulsory
License may grant-
 Reasonable requirements of the public have not been satisfied,
 Not available to the public at a reasonably affordable price.
 Not worked in the territory of India.
Considerations for granting Compulsory License21:
 the nature of 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.
 the ability of the applicant to work the invention to the public advantage.
 the capacity of the applicant to undertake the risk in providing capital and
working out the invention, if the application were granted.
 as to whether the applicant has made efforts to obtain a license from the
patentee on reasonable terms and conditions and such efforts have not been
successful within a reasonable period(six months).
Revocation of Patents22:
After expiration of two years from the date of the order granting the first compulsory
license, the central government or any person interested may apply to the Controller
for an order revoking the patent.
19 The Indian Patent Act, 1970
20 Ibid
21 The TRIPS Agreement

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Procedure after filing for Compulsory License23:
Prima Facie case being filed by the Controller
Forwards copies of the application to the patent holder
The same is then published in the official journal
Notice of opposition need to be filed by the patentee within a prescribed period
deemed fit by the Controller
The Controller shall notify the applicant in case of an opposition being filed
Both the applicant and the opponent get an opportunity to be heard before deciding
the case.
Termination of Compulsory License24: The Compulsory License may terminated in
following conditions-
 The operation of compulsory License may be terminated by the Controller if
and when the circumstances that gave rise to the grant thereof no longer exist
and such circumstances are unlikely to recur. and
23 Ibid.
24 B.L. Wadera, Law relating to Patents, Trademarks, Copyright, Designs & Geographical
Indications (Universal Law Publising Co Ltd, New Delhi, 2nd edn., 1999).

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 Any order for the grant of a license under this Chapter shall operate as if it
were a deed granting a license executed by the patentee and all other
necessary parties embodying the terms and conditions, if any, settled by the
Controller.
IV. Difference between Voluntary License and Compulsory License25
Voluntary License Compulsory License
1. Granted by innovator company to
multiple generic companies
Granted to remedy non-affordable drug
prices, national emergency, health crisis
of public or for govt. use.
2. Helps innovator reach newer
markets and focus on their core
R&D.
A royalty is paid by the compulsory
licensee to the patent holder.
3. Helps generics to generate
revenue and Facilitates affordable
priced drugs supply to public.
Respective govt. has the right to
determine the grounds for granting
compulsory License.
Compulsory licensing is usually done in two cases26:
1. It is ordered by governments to help benefit the society in case of pandemic.
One very good example is UN granting the compulsory license of AIDS drugs
25 Intellectual Property Rights: Theory & Indian Practice by Garima Gupta & Avih Rastogi
26 Daniel Gervais, TRIPS Agreement, The Drafting History and Analysis (Sweet & Maxwell,
London, 3rd edn., 2008)

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to help AIDS pandemic in Africa years back. Another example is this Taiwan
Issues Compulsory License for Tamiflu. This was for Swine Flu.
2. In second case it's granted by governments if an inventor is not using the
patent to manufacture any product and is using the patent ownership only to
stop others from making and selling. Under this scenario27 the licensee can
send for request to patent owner and if he declines, can approach government
to grant the compulsory license. Government would hear both side and if
found right can grant a compulsory license. But licensee will have to pay the
royalties to the patent owner for sure.
V. Compulsory licenses under International Law
The compulsory license is a concept that has been an accepted part of American
intellectual property ever since the US Copyright Act of 1909. It has been recognized
internationally via the Berne Convention for the Protection of Literary and Artistic
Works since 1908. US patent law, however, has not paralleled its intellectual
property sister copyright; historically compulsory licenses have not been common in
the patent field. But change is occurring due to the World Trade Organization’s
TRIPS and Doha Declaration which have brought to the international stage what
copyright has accepted for more than a century: the compulsory patent license
sanctified in international law. Developed countries – that is, patent-rich countries –
have an ethical obligation to help those less fortunate. If not, the compulsory license
can now be considered as an essential tool readily available in every poor country’s
toolkit to help gain access to otherwise inaccessible but desperately needed patented
innovation, especially in the area of public health and the accessibility of
pharmaceuticals.28
A. Under the Paris convention for the Protection of Industrial Property (1883)29
The Paris Convention applies to industrial property in the widest sense, including
patents, trademarks, industrial designs, utility models (a kind of "small-scale patent"
provided for by the laws of some countries), service marks, trade names
27 Will the lifeline of affordable medicines for poor countries be cut? Consequences of
medicines patenting in India (Briefing document) by Médecins Sans Frontières (February
2005)
28 https://www.tandfonline.com/doi/abs/10.1080/13600834.2016.1230928
29 https://www.wto.org/english/tratop_e/paris-convention-e/intel2_e.htm

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(designations under which an industrial or commercial activity is carried out),
geographical indications (indications of source and appellations of origin) and the
repression of unfair competition.
Under the provisions on national treatment, the Convention provides that, as regards
the protection of industrial property, each Contracting State must grant the same
protection to nationals of other Contracting States that it grants to its own nationals.
Nationals of non-Contracting States are also entitled to national treatment under the
Convention if they are domiciled or have a real and effective industrial or commercial
establishment in a Contracting State.
The purpose of the Paris Convention was to establish a system for inventors to
protect their inventions internationally and envisaged provisions for each contracting
State to take legislative measures for granting compulsory licenses.
Article 5A(2) 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.
B. Under Berne Convention for the Protection of Literary and Artistic Works
(1886)30
The Berne Convention deals with the protection of works and the rights of their
authors. It is based on three basic principles and contains a series of provisions
determining the minimum protection to be granted, as well as special provisions
available to developing countries that want to make use of them.
The three basic principles are the following:
1. Works originating in one of the Contracting States (that is, works the author
of which is a national of such a State or works first published in such a State)
must be given the same protection in each of the other Contracting States as
30 http://www.wipo.int/treaties/en/ip/berne/summary_berne.html

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the latter grants to the works of its own nationals (principle of "national
treatment")31
2. Protection must not be conditional upon compliance with any formality
(principle of "automatic" protection).32
3. Protection must not be conditional upon compliance with any formality
(principle of "automatic" protection).33
C. Under TRIPS Agreement on compulsory licensing of pharmaceuticals (1995)34
Compulsory licensing is covered in the TRIPS Agreement by:
1. Article 30, which provides limited exceptions to the rights conferred under patents,
provided they do not unreasonably prejudice the legitimate interests of the patent
owner, taking into account the legitimate interests of third parties. This article
provides the basis for issuing compulsory licenses;
2. Article 31, which refer to compulsory licensing as other use without authorization
of the rights holder, but allow countries to do so only under certain conditions.
Compulsory License as TRIPS Flexibility:
There is no compulsion under TRIPS for the developing countries to follow the
liberal patent standards of developed countries. Rather TRIPS required member
nations to provide minimum standards of patent protection. 35
Under Article 27(1) of TRIPS36, patents will have to be provided for inventions,
which are “new, involve an inventive step and are capable of industrial application”.
TRIPS however do not define these terms. This provides some flexibility.
31 Under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS
Agreement), the principles of national treatment, automatic protection and independence of
protection also bind those World Trade Organization (WTO) Members not party to the Berne
Convention.
32 Idem
33 Idem
34 The TRIPS Agreement
35 Annex IC of the Agreement Establishing the World Trade Organization of 1994

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Article 31 of TRIPS dealing with compulsory licensing does not place any restriction
on the grounds under which a compulsory licenses can be granted. TRIPS do not use
the term “compulsory license.” However, Article 31 refers to “use without
authorization of the right holder,” and includes, both, use by third parties (what is
usually referred to as compulsory licenses) and use by government.
The member countries can use this provision on grounds of public interest, abuse of
patent or anti-competitive conduct, public non-commercial use, under national
emergency and circumstances of extreme emergencies. Thus, TRIPS provides for
some flexibility to member countries of WTO to take action to tackle the negative
consequences of patent protection. India agreed to adopt TRIPS on account of these
flexibilities. WHO and WTO point out that compulsory licensing is one of the ways in
which TRIPS attempts to strike a balance between promoting access to existing
drugs and promoting R&D into new drugs.37
D. Scope of Compulsory License through the Doha Declaration®38
Under TRIPS agreement a member country with pharmaceutical manufacturing
capacity can resort to Compulsory Licensing to manufacture patented drugs to meet
public health needs. But under Article 31(f) this flexibility has a limitation, by which
production under a Compulsory License has to be predominantly to supply only for
domestic market. This implies that member countries manufacturing the patented
medicines under a Compulsory License cannot export these medicines to other
countries.39 Thus, countries with no manufacturing capacity trying to meet the health
requirements by importing the patented medicines would face a stumbling block due
to Article 31(f) which restricts the manufacturing countries from exporting the
required patented medicines produced under a Compulsory License.
The Declaration on TRIPS Agreement and Public Health adopted during the WTO
Ministerial meeting held in November 2001 in Doha (referred to as the Doha
36 TRIPS Article 27.1
37 http://www.who.int/hiv/amds/IDA_India-Patent-amendments-Sudip.pdf
38 Day-to-day work is handled by the General Council where all the member countries are
represented. The TRIPS Council, the Goods Council and the Services Council deal specifically
with the three main Agreements, which includes TRIPS, and report to the General Council.
39 Park C, Menghaney L, “TRIPS flexibilities: the scope of patentability and oppositions to
patents in India”, 2010.

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Declaration) in its paragraph 66 addressed this major lacuna in TRIPS. It instructed
the TRIPS Council to find an expeditious solution to this problem and to report the
General Council40 before end of 2002. However, no consensus could be reached by
December 2002 due to the differences between the developed countries and
developing countries over the scope of the solution, including the diseases and
medicines to be covered, countries to be eligible to import, and the procedures to be
followed.41 Ultimately, a compromise was reached on 30 August, 2003 which
proposed a waiver of the obligation under Article 31(f) of TRIPS that Compulsory
License can be granted predominantly for the supply of domestic market.
The Decision of 30 August, 2003 permits countries producing patented drugs under
Compulsory License to export to countries with less or no manufacturing capacities.
However, if any developed country opposes the action taken by a developing country
in support of its right to take measures to protect public health, such developing
country can rely on the Doha Declaration in the WTO dispute settlement body.
Accordingly, Section 92-A was inserted in the Indian Patents Act, 1970, along with
the other amendments in 2005, enabling the grant of Compulsory license for the
manufacture and export of patented pharmaceutical products to any country having
insufficient or no manufacturing capacity w.r.t the patented pharmaceutical product
in order to address “public health needs”. One such example is the case of Rwanda
and Canada.42
40 Sherer, F.M. & Jayashree Watal, “Post-Trips Options for Access to Patented Medicines in
Developing Countries”, 2002, p. 15.
41 http://www.law.fsu.edu/gpc2007/materials/PROCURINGESSENTIALMEDICINES.pdf
42 Government cautious on cancer drug patent regimes – Th e Times of India, 1 March 2014,
Siddarth. Accessed at http://timesofindia.indiatimes.com/business/india-business/Govt-
cautious-oncancer-drug-patent-regimes/articleshow/31193236.cms

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VI. Compulsory License under Indian Patent Law Provisions
The Patents Act, 1970 amended in 2005 has elaborate provisions on compulsory
licensing in Chapter XVI (Sections 82 to 94). These provisions along with rules
elucidates the grounds and procedure to be followed by applicants seeking
compulsory license, the grounds available to apply for compulsory license, the due
considerations and procedure to be followed by patent office while deciding the
compulsory license grant, grant of compulsory license under extreme and emergency
situations, for purpose of exporting generic medicines and the power vested with the
government to use the patented invention for its own use.
A. Procedure for grant of compulsory license under section 84:
Prior to making an application for Compulsory license under section 84, the
applicant should attempt to obtain a voluntary license from the patent-holder in
order to make, use, offer for sale, sell or import the patentee’s invention.43 It is only
when patent holder refuses to consent and grant a voluntary license on reasonable
terms and conditions resulting in failure of applicant’s attempt to obtain a voluntary
license, the applicant can then apply to the Patent Controller for a compulsory
license on anyone of the grounds enlisted under section 84 (1).
The procedure for grant of compulsory license before the Patent Controller sets out a
two-step procedure.44 Firstly, the Controller examines the application for a
compulsory license to determine if the application indeed discloses sufficient facts
and incidents which are able to support the grounds raised therein for the grant of
compulsory license i.e. whether a prima facie case has been made out for issuing a
compulsory licence.
The procedure is open-ended without any time limit imposed for the grant of
compulsory licenses. Thus, the patentees can oppose the grant of compulsory license
43 Chaudhuri S, “The WTO and India’s pharmaceuticals industry: patent protection TRIPS
and developing countries”, Oxford University Press, 2005.
44 Chakravarthi Raghavan - Expeditious, permanent solution sought on public health and
TRIPS

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and if granted, appeal against such decisions and indefinitely delay or prevent the
actual use of compulsory license.45
B. Use of Compulsory License in circumstances of national emergency, extreme
urgency, or public non-commercial use:
The other key provision is section 92. This provision allows grant of compulsory
license at any time by the government under circumstances of national emergency or
45 www.twnside.org.sg/title2/par/rep001.doc - Imports by and exports to countries with
insufficient or no manufacturing capacities in the pharmaceutical sector

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in circumstances of extreme urgency or in case of public non-commercial use. The
government may in this respect either make a declaration or issue a notification in
the official gazette.46 The procedure mentioned above for the grant of compulsory
licenses will have to be followed for these applications too, except that the applicant
is not required to approach the patentee for a voluntary license.
The main advantages of issuance of compulsory license through government
notification are—
 No waiting period: Once such a declaration is made, an application for
compulsory license can be filed at any time. The three-year waiting period
from the date of grant of patent does not apply as in case of an application for
Compulsory license made under section 84.
 No requirement for prior negotiations of voluntary license: As set out earlier,
the Controller need not consider if the applicant has entered into prior
negotiations for a voluntary license.47
 Dispensation of hearing: If the Controller is satisfied that in the cases listed
above, including in case of public health crises, including AIDS, HIV, TB,
malaria or other epidemics, the Controller shall not follow the procedures for
hearing. The Controller is only required to inform the patentee, as soon as
may be practicable, of the application for non-application of the hearing
procedure.
 Attempt to endeavor lowest prices: The Controller is further required to
endeavor, while settling the terms and conditions of the compulsory license,
that the product shall be available to the public at the lowest prices consistent
with the patentees deriving a reasonable advantage from their patent rights.
C. Use of Compulsory License by the Government
The Indian patent law also provides for government use of patents under section 100
of Patents Act, 1970. The Central government or State government or government
undertaking may acquire a patented invention for its own use, make, exercise or
46 Park C, Menghaney L, “TRIPS flexibilities: the scope of patentability and oppositions to
patents in India”, 2010.
47 Elizabeth Verkey, “Law of Patents”, Eastern Books Agency, Kolkatta, 2005, p. 321.

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vend on payment of adequate remuneration or compensation (Sections 99 to 103).48
The Central Government is required to notify the patentee as soon as practicable of
the use of the invention and furnish information about the extent of the use of the
invention, from time to time, as the patentee may reasonably require.
However, this requirement of notification as soon as practicable is not required to be
complied with in case of national emergency, extreme urgency for public
noncommercial use. The patent owner however can challenge such a use or the
terms of such use. Any such disputes are required to be judicially settled.49
Specifically, under section 102 the Central Government may acquire a patented
invention for a public purpose. In such a case of acquisition of the patented invention
by the Central Government, the rights of the patentee come to be vested in the
Central Government. Whereas, in case of compulsory license for Government use,
the patentee retains his patent rights.50 The patent holder is still the owner of the
patented invention even after the issuance of compulsory license for Government
use. While in the case of acquisition of the patented invention by the Government for
public purpose, the patent owner loses all rights in the patent to the Government.
The patentee is to be notified of such acquisition and is entitled to compensation. The
patentee can seek to determine the quantum of compensation by approaching the
High Court but cannot challenge such acquisition of its patented invention by the
Government.
48 P. Narayanan,” Intellectual Property Law”, Eastern Books Agency, Kolkatta 3rd edn., 2001,
p. 45.
49 Chawla J., Generic Drugs v. Branded Drugs, available at:
http://www.buzzle.com/articles/generic drugs (accessed on 4th June, 2012).
50 Vishwas H Devaiah - TRIPS, patents and public policy: A pot of gold and a tale of woes!

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VII. Powers of Controller in granting Compulsory Licensing
Section 93 of Indian Patent Act, 197051 provides for powers of controller in granting
compulsory license. In which following provisions are given-
(1) Where the Controller is satisfied on application made under section 84 that the
manufacture, use or sale of materials not protected by the patent is prejudiced by
reason of conditions imposed by the patentee upon the grant of licenses under the
patent, or upon the purchase, hire or use of the patented article or process, he may,
subject to the provisions of that section, order the grant of licenses under the patent
to such customers of the applicant as he thinks fit as well as to the applicant.
(2) Where an application under section 84 is made by a person being the holder of a
license under the patent, the Controller may, if he makes an order for the grant of a
license to the applicant, order the existing license to be cancelled, or may, if he
thinks fit, instead of making an order for the grant of a license to the applicant, order
the existing license to be amended.
(3) Where on an application made under section 84, the Controller orders the grant
of a license, he may, for reasons to be recorded in writing, direct that the license
shall operate-
(a) to deprive the patentee of any right which he may have as patentee to make, use,
exercise or vend the invention or to grant licenses under the patent;
(b) to revoke all existing licenses in respect of the invention.

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(4) Where two or more patents are held by the same patentee and an applicant for a
compulsory license establishes that the reasonable requirements of the public have
not been satisfied with respect to some only of the said patents, then, if the
Controller is satisfied that the applicant cannot efficiently or satisfactorily work the
license granted to him under those patents without infringing the other patents held
by the patentee, he may, by order, direct the grant of a license in respect of the other
patents also to enable the licensee to work the patent or patents in regard to which a
license is granted under section 84.
(5) Where the terms and conditions of a license have been settled by the Controller,
the licensee may, at any time after he has worked the invention on a commercial
scale for a period of not less than twelve months, make an application to the
Controller for the revision of the terms and conditions on the ground that the terms
and conditions settled have proved to be more onerous than originally expected and
that in consequence thereof the licensee is unable to work the invention except at a
loss:
PROVIDED that no such application shall be entertained a second time.
In short words, following are the powers of Controller:52
 When an application for compulsory license is made by a patent holder: Order
the existing license to be cancelled, or May, if he thinks fit, instead of making
an order for the grant of a license to the applicant; order the existing license to
be amended.
 Where two or more patents are held by the same patentee: If the Controller is
satisfied that the applicant cannot efficiently or satisfactorily work the license
granted to him under those patents without infringing the other patents he
may, by order, direct the grant of a license in respect of the other patents also
to enable the licensee to work the patent or patents in regard to which a
license is granted.
 Where the terms and conditions of a license have been settled by the
Controller: The licensee may, at any time after working out the invention on a
52 P. Narayanan,” Intellectual Property Law”, Eastern Books Agency, Kolkatta 3rd edn., 2001,
p. 135.

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commercial scale for a period of not less than 12 months, apply to the
Controller for the revision of the terms and conditions on the ground that the
terms and conditions settled have proved to be more onerous than originally
expected and the licensee is unable to work the invention except at a loss,
provided that no such application shall be entertained a second time.53
Power of Controller to adjourn applications for compulsory license
1. If the controller is satisfied that the time elapsed since the sealing of the
patent has been insufficient to enable the invention to be worked on a
commercial scale.
2. A period of 12 months is usually granted to the patentee to work out the
invention in the territory of India.
3. Within one year the controller has to reveal his stand for the application.
53 (1995) FSR 325.

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VIII. Novartis AG Vs. Union of India54 and the Compulsory License
Regime in India
The judgment rendered by the Supreme Court in the case of Novartis AG
(“Novartis”) v. Union of India is one of the landmark judgements of the Supreme
Court. The decision came as a relief for millions of people around the world to have
access to medicines at a low cost, thus preventing the pharmaceutical industries from
“ever greening” their patents.
Brief Facts:55
In 1997, Novartis, a Swiss based pharmaceutical giant filed an application to grant
patent to an anticancer drug Glivec which is used to treat Chronic Myeloid Leukemia
(CML) and Gastrointestinal Stromal Tumours (GIST) on the basis that it invented the
beta crystalline salt form (imatinib mesylate) of the free base, imatinib.. It is a
critical drug which is patented in about 35 countries of the world.
However during those days, India did not grant patent to pharmaceutical products
and agrochemical products. It was in the year 2005 in India; the drug products
became the subject of patent in compliance with the TRIPS agreement. India thereon
revised its patent law and started granting patents on pharmaceutical drugs.
Subsequently in 2006, the Madras Patent Office refused the patent application of
Novartis for its drug Glivec stating that the said drug did not exhibit any major
changes in therapeutic effectiveness over its pre-existing form, which was already
patented outside India. The said decision was based on Section 3(d) of the Indian
Patents (Amendment) Act, 2005 which provides a known substance can only be
patented if its new forms exhibit “enhanced efficacy”. The Patent Office did not find
any enhanced efficacy in the drug Glivec and, therefore, considered it incapable of
patentable under Section 3(d) of 2005 Act.
In May 2006, Novartis filed two writ petitions under Article 226 of the Indian
Constitution before the High Court of Madras – one appealing against the order of
Madras Patent Office rejecting its patent request and the other contesting that
Section 3(d) of the Indian Patents Act is not in compliance with TRIPS and is vague,
arbitrary and violative of Article 14 of the Constitution.
54 (2013) 6 SCC 1.
55 https://www.lexology.com/library/detail.aspx?g=97441a81-b27b-43aa-a8ee-bf2522339cf0

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The Madras High Court refused the Writ Petitions of Novartis holding that it did not
have jurisdiction to determine whether a domestic law is in contrary to international
treaty, so it cannot decide whether Section 3(d) is in compliance with TRIPS. As far
as Section 3(d) is considered, the objective of the Amending Act was to prevent
evergreening and to make easy the access to life-saving drugs to the citizens.
Therefore, it cannot be considered to be vague and arbitrary.
The new phase of litigation started in Intellectual Property Appellate Board, which is
an appellate body of patent controller. IPAB considered the beta-crystalline form of
imatinib mesylate as new and an inventive step but refused to grant a patent to the
drug of Novartis since it was hit by Section 3(d) of the Act. Novartis challenged the
said order by filing Special Leave Petition before the Supreme Court.
Issues before Supreme Court:56 The main issues that came before the Supreme Court
were-
 Whether the invention is in consistent with Section 3(d) of the patent act?
 Interpretation of Section 3(d) of the patent act?
 Whether the invention qualifies for the test of novelty and inventive for the
alleged product?
Observations by the Supreme Court57: SC adopted the following approach-
 Court observed that the product was one of the new forms of the substance
and not the whole substance. It has always existed in the original amorphous
form. The product thus has to qualify the test laid down in Section 3(d) of the
Patent Act.
 The Section clearly specifies that a new form of the substance in not
patentable under Indian law unless it enhances its “known efficacy”.
 Novartis contended that the physico-chemical properties of the polymorph
form of the imatinib molecule, i.e. better flow properties, better
thermodynamic stability and lower hygroscopicity, resulted in improved
efficacy and hence is patentable under Indian law.
56 https://blog.ipleaders.in/analysis-novartis-g-vs-union-india/
57 https://blog.ipleaders.in/analysis-novartis-g-vs-union-india/

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The Apex Court rejected this contention stating that in the case of medicines,
efficacy means “therapeutic efficacy” and these properties while they may be
beneficial to some patients do not meet this standard. The Supreme Court also
held that patent applicants must prove the increase in therapeutic efficacy based
on research data in vivo in animals.
IX. NATCO Pharma LTD. Vs. Bayer Corporation and the Compulsory
License Regime in India58
Natco’s application for a compulsory license for Nexavar59 was filed before the
Controller General of Patents (‘the Controller’) in 2011, under §84(1) of the Indian
Patents Act, 1970 (‘the Act’).60 In a judgment delivered on March 9, 2012, the
Controller granted the license to Natco, against which Bayer appealed to the IPAB. In
the interim, Bayer sought a stay on the Controller’s decision but this was denied by
the IPAB.61 Even though the IPAB’s decision was largely the same as that of the
Controller, they differed slightly on some aspects. Referring to the Report of the
Justice N. Rajagopala Ayyangar Committee, TRIPS and the Code of Federal
Regulations of the United States, the IPAB approached the dispute from a public
health perspective in the context of the right to life under Article 21 of the
Constitution of India, 195062 and flagged the major issues based on the three-
pronged test laid out in §84(1) of the Act.63
58 6 NUJS Law Review 99 (2013)
59 Chemically known as ‘Sorafenib Tosylate’, the drug is used for the treatment of advanced
Stage liver and kidney cancer. By stopping the growth of new blood vessels and impacting
other cellular growth mechanisms, the drug can extend the life of a patient, the duration
being between 6 months and 5 years
60 The Indian Patents Act, 1970, §84(1) reads as follows:
84. Compulsory licenses.—(1) At any time after the expiration of three years from the date
of the grant of a patent, any person interested may make an application to the Controller for
grant of compulsory license on 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
61 Reuters, Bayer’s Plea for Stay on Nexavar Generic in India Dismissed, September 17,
2012, available at http://in.reuters.com/article/2012/09/17/india-bayer-natco-
idINL3E8KH5F320120917 (Last visited on May 12, 2013).
62 Art. 21 of the Constitution of India, 1950 protects the right to life, which has been subjected
to wide judicial interpretation. See Constitution of India, 1950, Art.47 (In the specific context
of public health).
63 Reference was also made to the Paris Convention for the Protection of Industrial Property,
1883 and the Doha declaration on the TRIPS Agreement and Public Health, 2001. In fact, the

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The Controller also disregarded Bayer's argument that sales of another Indian
generic company, Cipla, should be taken into account in determining whether the
Indian market was being reasonably satisfied, noting that Bayer had sued Cipla in
Delhi and asked for an injunction to stop these infringing sales. (In this regard, later
in the decision the Controller characterizes this argument as "indulging in two-
facedness" and "defend[ing] the indefensible.") In so doing, the Controller also
enunciated an Indian-centric philosophy, stating that "the mandate of law is not just
to supply the drug in the market but to make it available in a manner such that
substantial portion of the public is able to reap the benefits of the invention" and that
"[i]f the terms are unreasonable such as high cost of nRS.2,80,000/-, availability is
meaningless." (This aspect of the decision was illustrated by the Controller's
calculation that, at Bayer's prices it would take the "common man" (the lowest-paid
government worker) 3.5 years' wages to afford one month's supply of the drug, but
Nexavar extends life for the kidney cancer patient by only 4-6 years and the liver
cancer patient by only 6-8 months.) In coming to these determinations, the
Controller cited a Bulletin from the World Health Organization; a research article on
the "impoverishing effects" of the affordability of medicines in the developing world
from PLoS; and an affidavit from James Packard Love, Director of Knowledge
Ecology International and co-chair of the Trans-Atlantic Consumer Dialog Policy
Committee on Intellectual Property Rights. (Perhaps) needless to say, these sources
did not support Bayer's petition that the Indian government deny a compulsory
license to Natco.
In India, the following situations may attract compulsory licensing where IP holder:64
 Charges unfair and discriminatory prices; or
 Limits production of goods and services; or
 Restricts technical or scientific development of goods and services; or
 Desecrates consumer welfare
IPAB outlined the following four markers to be kept in mind while dealing with this issue:
(a) Patents are not granted for an import monopoly of the patented article,
(b) The grant of a patent shall not impede protection of public health,
(c) The grant of a patent must balance the rights and obligations and finally,
(d) It must make the benefits of the patented invention available at a reasonably affordable
price to the public.
64 C.L.A. No. 1 of 2011, Order pronounced on March 9, 2012.

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X. Conclusion
Developing countries should adopt expansive interpretation of public health to
enable use of TRIPS flexibilities to protect, promote and advance access to affordable
medicines. As a way to enhance and enable access to affordable medicines
developing countries, specifically Brazil, Russia, India, China and South Africa
(BRICS) should collaborate and create a platform on South-South cooperation.
BRICS should push for utilization of TRIPS flexibilities such as compulsory license
on public health grounds. Further developing countries should learn from each other
and emulate lessons countries for the use of compulsory license to make available
patented medicines at affordable price. For example India could follow the footsteps
of Thailand in utilizing the TRIPS flexibilities. India should make effective use of
compulsory licensing to ensure transfer of technology to India and to check abuse of
patent rights like excessive pricing of patented medicines.
Developing countries should reject FTAs with riders which mitigate compulsory
license provisions and resist inclusion of restrictions which would undermine the use
of compulsory license by developed countries.

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