1. Compulsory Licensing under
Indian Patent Law

2. What is a patent
A patent is a grant from the government which
confers on the patentee for a limited period of
time the exclusive privilege of making, selling
and using the invention for which a patent has
been granted

3. Purpose of a Patent
To enjoy the exclusive rights over the
invention.
To ensure commercial returns to the
inventor for the time and money
spend in generating a new product.

4. What inventions are Patentable
In order to be patentable , an
invention must pass three tests:-
•The invention must be “novel”
•The invention must be Non Obvious
•The invention must have industrial
applicability

5. Patent protection under Indian Law
• The Patent Act of 1970 was passed to govern
the granting of Patents under Indian Law.
• To make the Indian Patent Act, 1970
compliant with the Trade Related Aspects of
Intellectual Property Law (TRIPS) Agreement
the act was amended in the years 1999,2002
and 2005.

6. Salient Features of the Act
• Provides for two types of Patent:-
-) Product Patent
-) Process Patent
• Term of Patent is 20 Years
• Act provides for both pre and post grant opposition
• No product patents for substances intended for use as food,
drugs and medicines including the product of chemical
processes
• Provision for non-working as ground for compulsory licenses,
licenses of right, and revocation of patents
• Provision for appeal to High Court on certain decisions of the
Controller

7. Safeguards under the Act
Compulsory license to
ensure availability of drugs
at reasonable prices
Provision to deal with
public health emergency
Revocation of patent in
public interest and also on
security considerations

8. Compulsory Licensing
Compulsory
Licensing is defined
by the WTO as :-
“Compulsory
licensing is when a
government allows
someone else to
produce the
patented product
or process without
the consent of the
patent owner.”

9. • The provisions related to Compulsory License
are dealt with Under Chapter XVI of the Patent
Act comprising sections 84 to 92
• The Patent act allows for grant of Compulsory
License for the following two grounds
o Abuse of Patent Right
o Public Interest

10. Grounds for obtaining a compulsory
license
Sec. 84 lays down three grounds for grant of a compulsory
license:-
• That the reasonable requirements of the public with
respect to the patented invention have not been satisfied.
• That the patented invention is not available to the public at
a reasonably affordable price.
• That the patented invention is not worked in the territory
of India.

11. Application for Obtaining a Compulsory License
The Application should be made
after three years of grant of
Patent.
The Application should be made
by a “person interested” as
defined by Sec 2(t) of the Indian
Patents Act :-
"person interested"
includes a person engaged
in, or in promoting,
research in the same field
as that to which the
invention relates;
The party applying for compulsory
licensing must have sought to
obtain a voluntary license from
the patentee on reasonable terms
and such efforts have not been
successful within a reasonable
period as per the Controller of
Patents.

12. In Summary
Application is made by person interested
Having capacity to work the invention on
a commercial scale
Having sought to obtain a voluntary
license on reasonable terms

13. Procedure for grant of Compulsory License
After the hearing, an appeal shall lie to the appellate board from all decisions of
the controller within a period of six months
After the notice of opposition is filed, the controller shall fix a date for hearing of
the case
An opportunity shall be given to the patentee or any other person to file
opposition to grant of said license.
Upon receiving the application the controller determines whether a prima facie
case is made out

14. REASONABLE REQUIREMENTS
Sec 84(7) lays down the conditions under which reasonable requirements shall
deemed to not have been satisfied if:-
• (i)The continuance/development of an
existing trade/industry or the
establishment of a new trade/industry is
hampered/prejudiced
• (ii)The demand for the patented article
has not been met to an adequate extent
and on reasonable terms.
• (iii) A market for export of the patented
article manufactured in India is not being
supplied or developed.
Sec 84(7)(a)

15. • By imposition of conditions on license by the
patentee, manufacture, use or sale of materials
not protected by the patent is prejudiced
Section
84(7)(b)
• a licence is granted under an exclusive grant
back condition, such condition shall on its own
constitute a situation in which the reasonable
requirement of the public shall be deemed to
not have been satisfied
Section 84(7)
(c)
• the patented invention is not being worked in
India on a ‘commercial scale’
Section
84(7)(d)
• the working of the patented invention on a
commercial scale in the territory of India is being
prevented or hindered by the importation from
abroad of the patented article
Section
84(7)(e)

16. Invention is not reasonably priced
The patentee must make invention available to the public at a reasonable
price.
What is reasonable price depends upon the facts and circumstances of each
case.
If the price charged is an ‘excessive’ one, it may, in certain
circumstances, also amount to an ‘abuse’ of a dominant position
under the Competition Act (2002).
• “Affordable to public is required to be considered
as affordable to different sections of the society.”
As was held by the
Controller:-

17. Invention is not worked in India
• It was held by the Controller of Patents in the case of Natco Pharma vs. Bayer
Corporation Ltd that working meant “Manufacturing in India to a reasonable
extent”
• It could be argued that the word ‘worked’ could include even importation
However Sec 83(b) states that:-
“Patents are not granted merely to enable patentees to enjoy monopolies for
the importation of the patented article”
This would negate any interpretation that one who merely imports the patented
product can be said to have worked the invention in the territory of India.
• The High court of Bombay has however held that mere importation can be
classified as working if the patentee can show that local manufacturing was not
possible

18. Terms and Conditions for grant of
Compulsory License
Sec 90 lays down certain terms and conditions that the controller shall endeavour to
secure for the patentee:-
• that the royalty if any, reserved to the patentee or other person beneficially
entitled to the patent, is reasonable.
• that the patented invention is worked to the fullest extent by the person to whom
the licence is granted and with reasonable profit to him.
• that the patented articles are made available to the public at reasonably affordable
prices.
• that the licence granted is a non-exclusive licence.
• that the right of the licensee is non-assignable.
• that the licence is for the balance term of the patent.

19. Revocation of Compulsory License
According to Sec 85 of Indian Patents Act, 1970
After 2 years of grant of Compulsory License any interested
person may file an application with the controller to revoke the
patent on the following grounds:
• reasonable requirements of the public with respect to the
patented invention has not been satisfied
• the patented invention is not available to the public at a
reasonably affordable price.
• invention has not been worked in the territory of India
The Controller if satisfied, that any of the grounds have been
met may pass an order to revoke the patent.

20. Compulsory licences on notifications by
Central Government
Section 92 of the act lays down 3 grounds for which a compulsory license may be
granted by the government.
They are:-
• National Emergency
• Extreme urgency
• Public Non Commercial Use
If the government is satisfied that it is necessary that Compulsory License be granted
they may make a declaration by notification in the official gazette.
Subsequent to such declaration any interested party may make an application for CL
and the same shall be granted as per terms and conditions set by the Controller.
In this situation an Interested Party does not have to wait for three years before
making said application.

21. Legal Precedent
Natco Pharma Ltd Vs. Bayer Corporation, 2012
in front of the Controller of Patents.

22. Facts of the Case
• The Defendant is a corporation incorporated under the laws of United States
of America (USA). The petitioner invented and developed its patented drug
Nexavar
• On March 3rd 2008, the petitioner was granted a patent by the Controller of
Patents in India.
• The Patentee sold the drug in India at Rs2,80,000 per month.
• On 29th July 2011, Natco applied to the controller for a compulsory license.
Such application came about after Bayer refused to grant a voluntary license
when Natco had applied for one in December, 2010.
• By order dated 9 March 2012 of the Controller while granting compulsory
licence to Natco to manufacture and sell the patented drug also directed it to
pay to the petitioner royalty at 6% of its net sales of the patented drug.

23. • The petitioner appealed the decision in the Appellate Tribunal,
where by decision dated 14th September,2012 the tribunal upheld
the decision of the controller.
• The decision of the Tribunal was Challenged in the High Court of
Bombay by way of Writ petition under Art. 226. The High court
upheld the decisions of the Controller and tribunal and dismissed
said appeal

24. Issue 1-Reasonable requirements of the public were
not satisfied
Patentee’s submission:-
• Bayer argued that sales made by them and CIPLA satisfied reasonable
requirements of the public.
The patentee argued that sales made by CIPLA should be a factor as if Bayer did
succeed in getting an injunction against CIPLA in an infringement suit for Nexavar
which was on-going in the Delhi High Court, the sales made by CIPLA would be
deemed to be sales made by Bayer for the purpose of ascertaining damages.
Thus until a decision was passed in Delhi High Court the presence of CIPLA could
not be ignored.
Decision
• The controller did not accept said argument. It was held that it is the duty of the
person to whom the patent was granted to satisfy the requirements of the public.
It was submitted that when the appellant had issued statements that CIPLA was
an infringer and was fully pursuing a civil suit against CIPLA, it is impossible to
accept its case that CIPLA’s sales should be taken into account.

25. Issue 2-The drug was not available at reasonably
affordable price
Patentee’s Submissions:-
• Bayer argued that the cost of R & D and cost of manufacturing must be taken into
account while determining reasonably affordable price.
• The contended that reasonably affordable price should be reasonable to both the
patentee and the public.
Decision
• The controller rejected the contention of the patentee and held that the
reasonably affordable price is to be decided only with respect to the public and
not the patentee

26. Issue 3- Invention not worked in territory of India
Patentee’s Submissions :-
• Bayer argued that ‘working in territory’ did not mean manufactured in India.
Rather it meant supplied to India.
• They contended that the words ‘manufactured in India’ were deleted from Sec.
84(7)(a)(ii) during the amendment act of 2002 thus negating the requirement of
local manufacture.
Decision
• The court pointed out that the words ‘manufactured in India’ under Sec 84(7)(a)(ii)
had referred to a separate ground for granting compulsory License i.e.- Reasonable
Requirements. Thus according to the Controller the concept of ‘Manufactured in
India’ was removed from the context and made a separate ground for granting CL.
• The Court held that the term ‘worked in the territory of India’ could not be
restricted to ‘worked on a commercial scale’ and had to be interpreted as
manufactured in India to a reasonable extent

27. Order passed by the Controller
As the grounds mentioned under Sec 84 were satisfied the
controller granted a compulsory License to Natco Pharma Ltd.
With the following terms and conditions:-
• The price of the product was set at Rs. 8800 per month.
• The Royalty was set at 6%. However in the consequent appeal royalty was
increased to 7%
• The license is non exclusive
• The license is non assignable
• License is for manufacture and sale within territory of India only.
• The license is for balance term of patent only.

28. Fin.