Two angles to compulsory licensing of patents and a disaster waiting to happen

One of the core objectives of a patent system is to make the patented technology available to the public at reasonably affordable price, meet the reasonable requirements of the public and should be worked in the territory of India. A compulsory license will be granted on a patent only if the patent holder uses his patent in a manner that contravenes the aforesaid objective.

Relevant Governing statute:

Section 84(1) of the Indian Patent Act corresponding to the grounds for granting a compulsory license on a patent is reproduced below;

 (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:—

  1. that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or
  2.  that the patented invention is not available to the public at a reasonably affordable price, or
  3.    that the patented invention is not worked in the territory of India.

PROCEDURE TO APPLY FOR COMPULSORY LICENSE:

To obtain a compulsory license, an application has to be made to the Controller at any time after the expiry of three years from the date of grant of patent. It shall be noted that, a compulsory license can be acquired by any interested person. As per the Indian Patent Act, interested person includes a person engaged in, or in promoting, research in the same field to which the invention relates.

Relevant Governing statute:

(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:—

LANDMARK DECISION:

Natco Vs Bayer was the first case in which compulsory license was granted in India. Natco obtained a compulsory license to produce and market Nexavar, an anticancer drug on which Bayer’s holds a patent.

On the other hand, a compulsory license was rejected when a Mumbai-based company, BDR Pharmaceuticals filed an application for a compulsory licence to make a generic version of anti-cancer drug Dasatinib, on which US drug maker Bristol-Myers Squibb holds a patent.

Interestingly, in both the cases, Section 84(1) of the Indian Patent Act, i.e. grounds for granting a compulsory license were satisfied. Evidence provided by both Natco and BDR pharmaceuticals for fulfilment of the aforementioned section is listed below.

Natco Pharma vs. Bayer(Nexavar)

BDR pharmaceuticals vs. Bristol-Myers Squibb's(Dasatinib)

Bayer's anticancer drug priced INR 2,80,000 a month.

Bristol-Myers Squibb's anticancer drug priced INR 1,65,680 for 60 tablets per month

Not manufactured within the territory of India.

Not manufactured within the territory of India.

Did not meet public requirement.

Did not meet public requirement.

COMPARISON:

A comparative study is provided below analyzing the scenario that lead to the grant of Compulsory license to NATCO, while rejecting compulsory license to BDR pharmaceuticals.

Section 84(6)(iv)of Indian Patent Act states that, in order to apply for a compulsory license, the applicant (compulsory licence seeker) has to make efforts to obtain a voluntary license for the patented drug from the patentee within a reasonable time.

Reasonable time period shall be construed as a period not ordinarily exceeding a period of six months. It shall be noted that, such restrictions however are not applicable in case of national emergency or other circumstances of extreme urgency in case of public non-commercial use or on establishment of a ground of anti-competitive practice adopted by the patentee.

Relevant Governing statute:

(6) In considering the application field under this section, the Controller shall take into account,—

  (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:

Natco Pharma VS Bayer:

Hyderabad based Natco Pharma Limited was granted a compulsory license for Sorafenib Tosylate (Brand Name: Nexavar) on   4th March 2013. Nexavar is an anti cancer drug used for first-line treatment for liver and kidney cancer.

IPAB decision:

57. In view of the significance of the order of the compulsory licence made in India for the first time, we have dealt with each of the issues in detail, though we have broadly confirmed the impunged order. In the result, for the reasons stated above , the grant of compulsory license is confirmed and the impunged order is modified only to the extent of rate of royalty to be paid to the patentee as indicated above and in other respects, the appeal is dismissed. No costs.

Natco Pharma had requested Bayer (patentee) for voluntary license for manufacturing and selling the drug Nexavar. It proposed to sell the drug at a price of INR 8800 for one month therapy as compared to the price of about INR 2,80,428 being charged by patentee at the time of making the application.

COMMUNICATION BETWEEN NATCO AND BAYER FOR VOLUNTARY LICENCE

In order to obtain a voluntary license from Bayer, Natco had communicated their intension to acquire the license. IPAB in its decision has summarized the communication from Natco to Bayer, and is reproduced below:

‘we understand that the cost of therapy per month for the said drug as sold by you works out to about Rs.2,80,000/- and ……… most of the patients are from the low and middle income groups that can seldom afford such expensive drug’. The letter stated that the access to the treatment of cancer is denied ‘particularly due to the high pricing of the product’. The 3rd respondent wrote that they would be in a position to make the product available to the public in India at a cost of less than Rs.10,000/- for one month and that at such price, even the Government Agencies would come forward to offer financial assistance to the patients and in this context, they applied for licence for the manufacture and marketing of Nexavar so that protection of public health is not impeded due to the present high price. They finally requested for the “grant of a voluntary licence to us to manufacture and market the product on such reasonable terms and conditions which would not prevent us from making the drug available to the public at the affordable price as projected above”.

Bayer’s reply to the aforementioned letter:

Your company is not able to make out a case for the grant of voluntary licence to manufacture and market the product Nexavar. Therefore, our client does not consider it appropriate to grant voluntary licence to manufacture and market the product Nexavar to NATCO’

It can be construed from the aforementioned statement that, Bayer had rejected the request of Natco for voluntary license. Further, it can also be interpreted that Natco had made reasonable efforts to get voluntary license from the patentee and hence, the prima facie case has been made out according to sec 84(6)(iv).

BDR VS Bristol-Myers Squibb's (BMS):

BDR Pharmaceuticals had filed for a compulsory license on 4th March 2013 for BMS patent on Dasatinib, used by patients with Chronic Myleoid leukemia(CML).

Prior to filing a compulsory license, BDR had applied for voluntary license to BMS for Dasatinib on Feb 2nd 2012.

Following are the terms and conditions submitted by the applicant while requesting for voluntary license:

  • Would make the drug available at a price of Rs.135 per tablet i.e. Rs.8100 per month.
  • Product under license shall be manufactured with indication for CML
  • Royalty to be paid as fixed by the controller
  • Availability of the patented product to the economically weaker sections of people…
  • Offering free drug to certain percentage of patients suffering from CML as determined by the cancer specialists.

Upon the request set forth by BDR for voluntary license, BMS (patentee), in a letter dated 13th March 2012, had raised certain queries which are as follows:

"facts which demonstrate an ability to consistently supply high volume of the API, DASATINIB, to the market",facts showing your litigation history or any other factors which may jeopardize Bristol-Meyers Squibb's market position", "quality related facts and in particular compliance with local regulatory standards and basic GMP requirements", "quality assurance systems due diligence", "commercial supply teams", "safety and environmental profile", "risk of local corruption".

Seeking voluntary license from the patentee is a sine qua non to be exercised by the applicant before filing an application for compulsory license.

In the current case, BDR pharmaceutical considered the reply of BMS as rejection to their request for voluntary license. In addition to that, it didn’t make further efforts for settlement with the patentee within the reasonable time (6 months generally).

Moreover, it filed a compulsory license application on 4th March 2013, almost a year after the reply from the patentee.

Controller’s decision:

The applicant did not follow the scheme of the law as well as the procedure mandated by the law. I am therefore of the considered opinion that the applicant has failed to make out a prima facie for the making of an order under sec 87 of the Act. The application for compulsory licence, along with all the petitions for condonation of delay/irregularity, is hereby rejected.

The Controller has the right to reject the application for compulsory license, if the applicant for compulsory license has not made efforts to obtain a voluntary license from the patentee. It shall be noted that, efforts made by the applicant to seek a voluntary license from the patentee is a mandatory requirement. It is one of the grounds for consideration of the application filed for compulsory license.

In light of the above decision, it can be construed that, BDR pharmaceutical didn’t make reasonable efforts to convince the patentee (BMS) for grant of voluntary license on the drug DASATINIB. Hence, the prima facie case has not been met and the application for compulsory license had been rejected.

To obtain a compulsory license, the applicant should follow the patent law accordingly. Fulfilment of the Sec 84(1) solely does not mean that an applicant will obtain a compulsory license. There are other requirements as well, in addition to Sec 84(1), which have to be fulfilled.

So far we have been discussing the grounds for granting or rejecting compulsory licence. Now we shall analyze the law corresponding to how patents are treated once a compulsory licence is granted.

On grant of a compulsory license to an applicant, the applicant has a two years time period to work the patented invention in the territory of India. However, if the applicant doesn’t manufacture the patented invention in the territory of India, and hence the public requirement is not met at reasonable price, any person interested can apply to the controller for revocation of the patent. The relevant section sec 85(1) from the patent act is reproduced below:                                                                                                                    

  1. Where, in respect of a patent, a compulsory licence has been granted, the Central Government or any person interested may, after the expiration of two years from the date of the order granting the first compulsory licence, apply to the Controller for an order revoking the patent on the ground that the patented invention has not been worked in the territory of India or that reasonable requirements of the public with respect to the patented invention has not been satisfied or that the patented invention is not available to the public at a reasonably affordable price.

 

Further, if the controller is satisfied by the application filed by any interested person to revoke the patent, on the aforementioned ground, the Controller may revoke the patent according to section 85(3).

(3)The Controller, if satisfied that the reasonable requirements of the public with respect to the patented invention have not been satisfied or that patented invention has not been worked in the territory of India or that the patented invention is not available to the public at a reasonably affordable price, may make an order revoking the patent.

Should a patent be revoked under Section 85

According to Section 85 of Indian Patent Act, a patent can be revoked, if the applicant to whom the compulsory license is granted does not work the patented invention in the territory of India within two years from the grant of the compulsory license and further, the public requirements has not been met at affordable price.

The licensee is solely responsible for non working of the patented invention in the territory of India after obtaining the license but not the patentee. It would be injustice to the patentee, if a patent is revoked on the basis that, the licensee has not worked the patented invention in the territory of India even after expiration of two years on grant of the compulsory license. It shall be noted that, India is now witnessing grant of compulsory license, and hence, no one has invoked the provisions under Section 85. However, there is a high probability that provisions under Section 85 will be invoked in future. Now would be a good time to look at Section 85 in more detail, and amend it accordingly, before such scenario arises. It would be more justified to revoke the compulsory license, rather than revoking the patent!

Conclusion:

There are certain types of patented invention that play an important role in health and well being of the community, in such scenarios, compulsory licensing can play a pivotal role. Compulsory license is granted on fulfilment of certain terms and conditions as mentioned in the Indian Patent Act. The applicant filing for compulsory license therefore has to accordingly proceed to obtain the license. Further, the Indian Patent Act also provides provision for revocation of patent, if not being worked in the territory of India by the compulsory license holder, after a reasonable time period. In our opinion, consequences of non working of the patented invention by the licensee should not result in revocation of a patent.

We hope you found this article useful. You may be interested in reading our article "An Indian perspective on licensing or sale of patents"    

 

Feel free to write to us at contact@invntree.com

Best regards – Team InvnTree

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