Compulsory Licensing Under Section 31.
1. Introduction to Compulsory Licensing
Definition:
Compulsory licensing allows the government or courts to authorize a third party to produce a patented product or process without the consent of the patent holder under certain conditions.
Purpose:
Prevent abuse of patent rights.
Ensure availability of essential medicines and products at affordable prices.
Promote public interest, particularly health and access to medicines.
Legal Basis:
Section 31 of the Patents Act, 1970 (as amended) governs compulsory licensing in India.
Section 84 allows an application for compulsory license after three years from the date of patent grant.
2. Conditions for Grant of Compulsory License
2.1 Grounds under Section 84 (leading to Section 31)
A person can apply for compulsory license if:
The reasonable requirements of the public with respect to the patented invention are not being met.
The patented invention is not available at a reasonably affordable price.
The invention is not being worked in India.
2.2 Government can grant license under Section 100 and Section 92
Section 100: National emergency, extreme urgency, or public non-commercial use.
Section 92: Supply of medicines in circumstances of national emergency or for export to countries with insufficient manufacturing capacity.
3. Procedure for Compulsory Licensing
Application filed with the Controller General of Patents.
Hearing for both applicant and patent holder.
Considerations: Public interest, price, supply, and working of the patent in India.
If granted, licensee pays royalty to patent holder.
4. Important Case Laws on Compulsory Licensing in India
Case 1: Bayer Corporation v. Natco Pharma (2012) – Sorafenib (Nexavar)
Facts: Natco applied for a compulsory license for Bayer’s cancer drug Nexavar (treatment of kidney and liver cancer).
Reason:
Price was very high (~₹2,80,000 per month).
Drug was not sufficiently available in India.
Decision:
Controller General granted a compulsory license to Natco.
Natco allowed to sell at ₹8,800 per month (much lower).
Principle:
Public health and affordability take precedence over patent monopoly.
Demonstrates Section 84/31 in action.
Case 2: Lee Pharma Ltd. v. Cipla Ltd. (2016)
Facts: Lee Pharma held a patent for an anti-cancer drug; Cipla sought a license to manufacture it for domestic use.
Decision:
Application rejected initially because Lee Pharma’s price and supply were deemed reasonable.
Principle:
Compulsory license is not automatic; the applicant must prove unmet public need or unaffordability.
Case 3: BDR Pharma v. Bayer (2013)
Facts: BDR Pharma requested compulsory license for another cancer drug patented by Bayer.
Decision:
Controller rejected the request citing insufficient evidence that Bayer was failing to meet public requirements.
Principle:
Burden of proof lies on the applicant to show patent abuse or non-working in India.
Case 4: Roche v. Cipla (2014)
Facts: Cipla sought compulsory license for Roche’s anti-cancer drug Tarceva.
Decision:
Request rejected due to lack of public emergency or unaffordability evidence.
Principle:
Affordability and accessibility are key conditions, not just public health interest.
Case 5: Natco v. Bayer – Appeal in IPAB (2013)
Facts: Bayer challenged the compulsory license granted to Natco.
Decision:
Intellectual Property Appellate Board (IPAB) upheld the license.
Royalty set at 6% of net sales.
Principle:
Confirms judicial support for reasonable royalty payment when compulsory license is granted.
Case 6: Lee Pharma v. Natco (2017) – Non-Grant of License
Facts: Application for compulsory license on grounds of non-working.
Decision:
Rejected because patent holder was supplying in adequate quantity and at a reasonable price.
Principle:
Mere existence of patent is insufficient; non-working or unreasonable pricing must be proven.
5. Key Principles from Case Law
| Case | Patent / Drug | Key Principle |
|---|---|---|
| Bayer v. Natco (2012) | Nexavar | Public health and affordability justify compulsory license |
| Lee Pharma v. Cipla (2016) | Anti-cancer drug | License not automatic; must prove unmet public need |
| BDR Pharma v. Bayer (2013) | Cancer drug | Burden on applicant to prove non-working in India |
| Roche v. Cipla (2014) | Tarceva | Affordability & accessibility are key |
| Natco v. Bayer (IPAB 2013) | Nexavar | Reasonable royalty required; license upheld |
| Lee Pharma v. Natco (2017) | Patent non-working | License rejected due to adequate supply & pricing |
6. Important Observations
Public Interest is Paramount – Health and affordability can override patent monopoly.
Affordability Matters – If the price is beyond reasonable reach of public, license can be granted.
Working in India is Crucial – Patents must be exploited domestically; non-working can justify license.
Royalty Compensation – Patent holders are entitled to fair royalty, often a small % of net sales.
Compulsory License is Case-Specific – Not every high-priced drug or patented product qualifies.
Appeal Mechanism – Decisions by Controller can be appealed to IPAB and High Courts.
Conclusion:
Section 31 ensures balance between patent rights and public interest. The Bayer-Natco case is the landmark example showing how India prioritizes affordability and access. Compulsory licensing remains a critical tool in pharmaceutical patents, but courts carefully scrutinize claims to prevent misuse.
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