COMPULSORY LICENSING IN IP – A NEEDED EXCEPTION?
Compulsory licensing refers to the grant of IP licenses, particularly copyright or patent license by a national government without the owner’s consent for the purpose of wide utilization of the protected right. It is one of the flexibilities in the field of patent protection included in WTO’s agreement on intellectual property — the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement.
The grant of such a patent license tends to fulfill one of the three purposes:
1. Massive production of patented products (e.g. patented drugs) to cure a disease
2. Antitrust act to allow fair competition (e.g. between firms)
3. Non-commercial use (e.g. by the government) in the interest of the general public.
The patent owner still has rights over the patent, including a right to be paid compensation for copies of the products made under the compulsory licence. Even though the TRIPS Agreement does not specifically list the reasons that might be used to justify compulsory licensing. However, the Doha Declaration on TRIPS and Public Health confirms that countries are free to determine the grounds for granting compulsory licenses, and to determine what constitutes a national emergency. In India, the remuneration is reasonable “having regard to the nature of the invention, the expenditure incurred by the patentee in making the invention or in developing it and obtaining a patent and keeping it in force and other relevant factors.”
Indian Patent Law has several mechanisms to deal with potential abuse of the patent system as well as to ensure affordable access to medicines and public health facilities. For example; in India, the impact of the compulsory license issued in relation to sorafenib tosylate in 2012 is that the price charged for the drug produced under the compulsory license would not exceed $176 a month, which is about three percent of the price charged by the patentee. For example, in India, the license may be requested if, inter alia, “the other invention has made a substantial contribution to the establishment or development of commercial or industrial activities” in that country (as seen in the Bayer vs Natco case)
This concept is recognised at both national as well as international levels, with express mention in both (Indian) Patent Act, 1970 and TRIPS Agreement. There are certain pre-requisite conditions, given under Sections 84-92 (of the Patent Act), which need to be fulfilled if a compulsory license is to be granted in favour of someone (as seen in the Lee Pharma v AstraZeneca AB case)
However, two hitherto under-explored provisions of the Indian Patents Act have the potential to gain particular relevance in the present time, where the world fights against the Covid-19 pandemic. These are the provisions relating to compulsory licensing upon a notification by the central government (section 92) and the provision for revocation on ground of prejudice to the public (section 66). Both these provisions come into play only after the patent has been granted. These can be significant for access to diagnostic kits, vaccines and drugs undergoing trials, which are covered by existing patents. These clauses will not be relevant for any vaccine or drug that is still in the stage of development and for which patent applications are pending. The Act also says that such exceptional circumstances can include “public health crisis” relating to AIDS, TB, malaria or other epidemics. Therefore, a pandemic like Covid-19 directly creates a situation where in the Indian government can exercise its power under section 92.
It can, perhaps, be argued that any patent that reduces access to medicines during a pandemic is prejudicial to the public. This provision is different from the usual revocation provision (section 64) because it brings in elements of public interest and of what qualifies as prejudicial to the public. Therefore, this section is not dependant on the inherent strength or weakness of the patent itself. For a usual revocation, inter-alia, lack of novelty, inventive step, and industrial applicability is required to be proven. But this is not the case with revocation under section 66. However, it should be noted that section 66 is a more stringent provision because it gives the power to revoke. On the other hand, section 92 allows the patent to live and also allows some benefits to the patentee (by way of royalties) and the compulsory licensees.
It will be prudent if patents do not come in the way of cures and affordable access to such cures for Covid-19. The patent system has enough flexibility to allow for access to all during such emergency situations.
More importantly, the existence of such mechanisms in any Patent Law will probably alert patentees and could act as an inducement for them to (1) offer adequate supplies at affordable rates, (2) ensure that supplies are met through their own efforts as well as the efforts of their licensees, (3) enter into licensing contract on reasonable terms and (4) show, as an effective public relations exercise, that in dire times, they care more about people than the excessive profits. Such measures can enable them to probably avoid the fate of seeing their patents revoked or being the subject of special compulsory licenses. It should be noted here that social and economic welfare as well as the protection of public health are important goals that are recognized by TRIPS as well (see Article 7 and Article 8 https://www.wto.org/english/docs_e/legal_e/27-trips.pdf ).
With regards to the global prospective, this phenomenon of compulsory licensing is one of the hugely debated issue in many developing countries as the sane is gaining importance because of the unavailability and unaffordability of the medicines, and they are continuously granting more and more compulsory licenses. The developed countries of Europe, USA are opposing the same as it would make innovation difficult for the pharmaceutical companies.
The provision of compulsory licensing must be used judiciously as it is an exception and flexibility to the general rule of patent. The provision falls mid-way; neither full patent protection is granted, nor is it denied altogether it directly affects innovation funding and unfettered use of this provision may result in global pharmaceutical companies being hesitant to introduce new medicines in other countries. Hence the companies have to fix the cost of their patented module according to the economic status of the country if they want to protect their product from compulsory licensing.
Compulsory licensing has now become the hope for financially challenged patients in underdeveloped countries. India needs this provision owing to the economic condition of the majority population. But the challenge is that on one hand, it has to comply with the international standards of patent protection and on the other, it has to safeguard public health.