The current situation regarding the spread of COVID-19 has brought the entire world to a grinding halt. However, one of the sectors which seems to be immune from the COVID-19 impact is the pharmaceutical sector. Since the outbreak of the COVID-19 virus, pharmaceutical companies around the world have been aggressively engaged in the research and development (R&D) for a drug/vaccine which would assist in resisting COVID-19. Once such a drug/ vaccine is developed by any pharmaceutical company, the said company will definitely take all the necessary steps to protect the same by filing for a grant of a patent for the said invention.
Keeping in mind the times that we are in, there might come a situation where the principles behind the protection of intellectual property rights would have to be balanced with the public welfare. One such mechanism for balancing the rights of the intellectual property holder and the general public is compulsory licensing. The present article seeks to discuss the broad principles governing compulsory licensing, the judicial view that has beentaken on the same, and whether the same can be resorted to in case of difficulties in distribution of the possible drug/vaccine curing COVID-19.
PRINCIPLES GOVERNING COMPULSORY LICENCES
Compulsory licenses are permissions that are given to a third-party by the Controller General of Patents to make, use or sell a product or use a process that has been patented to make a certain product, without the need of the authorization of the owner of the patent. Under the Indian Patent Act, 1970 (“Act”), the provisions regarding compulsory licensing are specifically laid down under Chapter XVI of the Act. The various criteria which need to be fulfilled for a compulsory license to be granted are laid down under Sections 84 and 92 of the Act, such as the grounds for the grant of a compulsory license, factors to be considered by the Controller while deciding a grant of compulsory license, the general purpose of the grant of compulsory license, etc.
A compulsory license can be granted on an application by any interested person, after the expiry of three years from the date of grant of the patent. The grounds on which a compulsory license may be granted are:
1. The reasonable requirements of the public with respect to the patented invention have not been satisfied; or
2. The patented invention is not available to the public at a reasonably affordable price; or
3. The patented invention is not worked in the territory of India.
Importantly, under Section 92 of the Act, in cases of a national emergency, extreme urgency or cases of public non-commercial use, the Central Government may, at any time after the sealing of the patent, grant a compulsory license in respect of any patent in force to any person interested. Furthermore, in case of a public health crisis such as an epidemic, the procedure for grant of a compulsory license, as specified under Section 87 of the Act need not be followed. As Section 87 lays down the detailed procedure to be followed while applying for and granting a compulsory license, making it non-applicable to cases of epidemics would expedite the process of grant of a compulsory license and the access to the patented invention to the public would be fasttracked. The Controller, while settling the terms and conditions of a license granted under this section, is required to endeavour to ensure availability of the products/articles made using the patented invention at an affordable lowest prices to the public, at the same time ensuring that the patentees are also deriving a reasonable advantage from their patent rights.
JUDICIAL VIEW ON COMPULSORY LICENSING
The landmark judgment in India regarding compulsory licensing is the case of Bayer Corporation vs Union of India (“Bayer case”). The Bayer case arose in relation to Bayer Corporation’s (“Bayer”) 2010 patent over a compound called “Sorafenib Tosylate” which was sold as Nexavar and was used for the treatment of Liver Cancer. Natco Pharma (“Natco”) in 2010 approached Bayer for a grant of voluntary license for manufacturing and selling the patented drug in India under its brand name at a lesser price. However, the negotiations for the voluntary license failed, and thereafter in the year 2011, after the expiry of three years from the date of grant of Bayer’s patent, Natco filed an application to the Controller for grant of a compulsory license. The Controller after taking into consideration the various provisions of the Act, granted a compulsory license to Natco for manufacturing and selling the patented drug in India. The said order of the Controller was upheld by Intellectual Property Appellate Boards (“IPAB”).
Bayer aggrieved by the same filed a writ petition before Hon’ble High Court of Bombay, challenging IPAB’s order. The Hon’ble High Court upheld the IPAB’s decision and held that as Bayer was not selling the drug at an affordable price, it had failed to meet the reasonable requirement of the public in respect of the patented drug. The Hon’ble Court held that the onus was on the patentee to show that the patented invention/ drug was worked in India, by way of manufacture or otherwise. The Hon’ble Court further observed that the proceedings under Section 84 of the Act were in the public interest as the entire basis of the grant of the compulsory license is based on the objective that patented article is made available to the society in adequate numbers and at a reasonable price.
CAN COMPULSORY LICENSING BE RESORTED TO DURING COVID-19?
As discussed above, the Government has the right to grant compulsory licenses in cases of national emergency, extreme urgency, and in cases of public non-commercial use at any time after the sealing of the patent. However, to exercise the said powers, circumstances such as national emergency or extreme urgency are required to be established. Keeping in mind that COVID-19 has been declared as a pandemic by World Health Organisation and its grave impact on the entire nation, it is possible to label the present situation as a “national emergency” or a case of “extreme urgency”. The same would mean that in case any innovative vaccine or an effective drug is developed by an inventor and patented, the Government would be well within its rights to issue a compulsory license for the same to effectively combat the public health crisis. The grant of the compulsory license would aid public interest as it would result in the bulk manufacturing and sale of the patented invention (testing kits, vaccine, or a drug) at affordable prices to expedite the process of availability.
However, it should be kept in mind that issuance of a compulsory license is a drastic step that heavily impinges on the right of exclusivity and monopoly of a patentee, and would force the patentee to unwillingly settle for possibly a lower royalty rate as compared to voluntary license. Hence, such a step should only be resorted to in case the patentee is unwilling to enter into reasonable licenses for the adequate supply of the patented drug/vaccine at reasonable rates.
Interestingly, one of the pharmaceutical companies i.e. Gilead which has patented Remdesivir, a broad spectrum anti-viral drug which has demonstrated the potential for treating COVID-19, has signed a non-exclusive voluntary licensing agreements with five generic pharmaceutical manufacturers based in India and Pakistan to further expand the supply of Remdesivir The said license agreements not only grant the companies a nonexclusive right to receive a technology transfer of the manufacturing process for Remdesivir, but Gilead has also generously agreed to not charge any royalty until the World Health Organization declares the end of the Public Health Emergency regarding COVID-19, or until a pharmaceutical product other than Remdesivir or a vaccine is approved to treat or prevent COVID-19, whichever is earlier. This shows that a middle ground taken by pharmaceutical companies regarding licensing drugs/ vaccines developed in relation to COVID 19 would be beneficial for both the company as well as the public and would ensure that the Government would not have to resort to the drastic step of having to issue a compulsory license.
The judicial view taken in respect of compulsory licensing is that the entire basis of the grant of the compulsory license is based on the objective of balancing the rights of the inventor and the public and that public interest is paramount in deciding such a grant. In the present scenario, where the pandemic has infected people from every kind of economic background, the public interest would surely dictate that any drug or vaccine developed to combat COVID 19 be available widely and at a reasonable price. However, it also has to be ensured that a patentee that has spent large sums of money in developing such a drug/vaccine is adequately compensated for its efforts and hard work so that it is not discouraged from conducting further research into the field. A balance between the two can be made if a patentee acts reasonably and enters into voluntary licenses which ensures wide distribution of the said drug/vaccine so that the situation of the Government resorting to the issuance of a compulsory license and thereby taking away the autonomy of pricing and setting up terms of the license by the patentee can be avoided.
Ajay Bhargava (Senior Partner), Ankur Sangal (Partner), Sucheta Roy (Senior Associate) and Richa Bhargava (Associate) are part of the Intellectual Property Rights team of Khaitan & Co, New Delhi practicing (litigation and prosecution) across different forums nationally – Supreme Court, High Courts, District Courts and various quasijudicial Tribunals.