Introduction

Compulsory Licensing (CL) is a statutory mechanism provided under

Chapter XVI of the Indian Patents Act, 1970, whereby the Controller
of Patents is empowered to grant a license to a third party to use a
patented invention without the consent of the patent holder. This
mechanism is designed to prevent the abuse of patent rights and to
ensure that patented inventions serve the larger public interest.

The primary objective of compulsory licensing is to secure availability,

affordability, and local working of patented inventions, particularly in
critical sectors such as medicines, food, and essential technologies. It acts
as a safeguard against situations where the patentee fails to meet
reasonable public requirements or charges excessive prices.

The concept of compulsory licensing is rooted in international legal

obligations, including Article 5A of the Paris Convention for the Protection
of Industrial Property and Articles 30 and 31 of the TRIPS Agreement,
which permit member states to allow use of patents without authorization
of the right holder, subject to payment of adequate remuneration.

Thus, compulsory licensing represents a balance between two competing

interests:

1. The patentee’s exclusive rights and incentive to innovate; and

2. The public’s right to access essential inventions at reasonable and

affordable prices.

It reflects the Indian patent regime’s commitment to ensuring that

intellectual property protection does not override public welfare.

Objectives of Compulsory Licensing under the Indian Patents Act,

1970

The system of compulsory licensing under Chapter XVI of the Indian

Patents Act, 1970 is designed to ensure that patent rights are exercised in
a manner consistent with public welfare and national interest. The key
objectives are:

1. Satisfaction of Reasonable Public Requirements

To ensure that the reasonable requirements of the public with respect to

the patented invention are adequately met. If the demand for the
patented product is not sufficiently fulfilled, a compulsory license may be
granted.

2. Availability at Reasonably Affordable Prices

To make patented inventions accessible to the public at reasonably
affordable prices, particularly in sectors such as medicines and essential
goods, where excessive pricing may harm public interest.

3. Working of the Patent in India

To ensure that the patented invention is “worked” within the territory of

India, meaning it is manufactured or commercially exploited in India,
rather than merely being imported.

4. Prevention of Abuse of Patent Monopoly

To prevent misuse or abuse of exclusive patent rights, such as restrictive

practices, non-use of the patent, or anti-competitive conduct.

5. Promotion of Technology Transfer and Industrial Development

To encourage domestic manufacturing, technological advancement, and

industrial growth by facilitating access to patented technology when
necessary.

International Framework of Compulsory Licensing

The concept of compulsory licensing under Indian law is rooted in

international intellectual property instruments, particularly the Paris
Convention for the Protection of Industrial Property and the TRIPS
Agreement. These agreements recognize the sovereign right of member
states to regulate patent rights in the public interest.

1. Paris Convention – Article 5A

Article 5A of the Paris Convention recognizes compulsory licensing as a

remedy against abuse of patent rights. It authorizes member states to
grant compulsory licences in situations such as:

 Non-working of the patent (failure to commercially exploit the

invention).

 Anti-competitive or abusive practices by the patent holder.

 Public interest considerations requiring state intervention.

However, the Convention imposes certain time restrictions. A compulsory

licence cannot generally be granted before:

 3 years from the date of grant of the patent, or

 4 years from the date of filing of the patent application,

whichever period expires later.

Thus, the Paris Convention balances patent protection with safeguards

against misuse.

2. TRIPS Agreement, 1995

The TRIPS Agreement under the WTO provides a comprehensive global

framework governing compulsory licensing.

(A) Article 30 – Limited Exceptions

Article 30 permits member states to create limited exceptions to patent

rights, subject to the following conditions:

 The exception must not unreasonably conflict with the normal

exploitation of the patent.

 It must not unreasonably prejudice the legitimate interests of the

patentee.

 It must take into account the legitimate interests of third

parties.

(B) Article 31 – Use Without Authorization of the Right Holder

Article 31 lays down detailed conditions for granting compulsory licences:

1. Individual Consideration – Each case must be decided on its own

merits.

2. Prior Negotiation – Efforts must first be made to obtain a

voluntary licence on reasonable commercial terms.

This requirement may be waived in cases of:

o National emergency

o Extreme urgency

o Public non-commercial use

3. The licence must be:

o Non-exclusive

o Non-assignable

4. The use must be predominantly for the domestic market of the

member state.
 5. The licence must terminate when the circumstances justifying
it cease to exist.

6. Adequate remuneration must be paid to the patent holder.

7. Provision must exist for judicial or administrative review of the

decision.

Incorporation into Indian Law

These international principles were incorporated into Indian law through

amendments to the Indian Patents Act, 1970, particularly by the Patents
(Amendment) Acts of 2002 and 2005, ensuring compliance with TRIPS
while preserving India’s policy space to protect public health and national
interest.

Compulsory Licensing under the Indian Patents Act, 1970

Compulsory licensing in India is governed by Chapter XVI of the Indian

Patents Act, 1970. It provides a statutory mechanism through which the
Controller of Patents may authorize the use of a patented invention
without the consent of the patentee, subject to statutory safeguards and
payment of remuneration.

I. Statutory Framework (Chapter XVI)

The provisions relating to compulsory licensing are contained in the

following sections:

 Section 82 – Definitions

 Section 83 – General principles applicable to working of patented

inventions

 Section 84 – Compulsory licence on application

 Section 85 – Revocation of patent for non-working

 Sections 86–91 – Procedure and powers of the Controller

 Section 92 – Special provision for compulsory licence in cases of

national emergency, extreme urgency, or public non-commercial
use
  Section 92A – Compulsory licence for export of patented
pharmaceutical products to countries with insufficient
manufacturing capacity

 Section 94 – Termination of compulsory licence

These provisions collectively regulate the grant, scope, duration, and

termination of compulsory licences.

II. General Principles Governing Compulsory Licensing (Section

83)

Section 83 lays down guiding principles that inform the exercise of powers
under Chapter XVI. These include:

1. Encouragement of Invention and Working in India

Patents are granted to encourage inventions and to ensure that they
are worked in India on a commercial scale.

2. Prevention of Abuse of Patent Rights

Patent rights should not be abused or used merely to restrain trade
or adversely affect international transfer of technology.

3. Availability at Reasonable Prices

Patented inventions must be made available to the public at
reasonably affordable prices.

4. Promotion of Technological Innovation and Public Welfare

Patents should contribute to technological innovation, dissemination
of technology, and socio-economic welfare.

These principles guide the Controller while deciding applications for

compulsory licences.

III. Section 84 – General Compulsory Licence

1. Time Requirement

An application for compulsory licence can be made after the expiry of

three years from the date of grant of the patent.

2. Who May Apply

Any “person interested”, including a potential manufacturer or even

the Central Government, may apply to the Controller in the prescribed
form for grant of a compulsory licence.
Grounds for Grant of Compulsory Licence – Section 84(1), Indian
Patents Act, 1970

Under Section 84(1) of the Indian Patents Act, 1970, any person
interested may apply for a compulsory licence after the expiry of three
years from the date of grant of the patent.

The Controller may grant a compulsory licence if any one of the following
grounds is established:

1. Reasonable Requirements of the Public are Not Satisfied

This ground focuses on whether the patented invention adequately meets

public demand. The reasonable requirements of the public are deemed
not satisfied in situations such as:

 The demand for the patented product is not adequately met.

 The patentee refuses to grant licences on reasonable terms.

 Trade or industry in India is prejudiced.

 The patent holder imposes restrictive or anti-competitive licensing

conditions.

 The patented invention is not being supplied for export markets

where required.

This ground ensures that patent rights do not operate to the detriment of
public access or industrial growth.

2. Patented Invention Not Available at a Reasonably Affordable

Price

If the patented product is priced excessively and becomes inaccessible to

the public, compulsory licensing may be justified.

While examining affordability, the Controller considers:

 The price of the patented product.

 The cost of alternative or generic versions.

 The economic capacity of the public.

 Public health considerations.

Case Illustration
In Natco Pharma Ltd. v. Bayer Corporation, India’s first compulsory
licence was granted for the cancer drug Nexavar (Sorafenib Tosylate). The
licence was granted because:

 Bayer sold the drug at an extremely high price.

 The drug was unaffordable to the majority of Indian patients.

 Natco proposed to sell it at a substantially reduced price.

This case established affordability as a central factor in compulsory

licensing jurisprudence in India.

3. Patented Invention Not Worked in the Territory of India

The invention must be “worked” in India, meaning:

 There should be commercial manufacturing or exploitation in

India.

 Mere importation may not be sufficient, unless justified by valid

reasons.

The objective behind this requirement is to:

 Promote technology transfer.

 Encourage local manufacturing.

 Foster economic and industrial development within India.

Procedure for Grant of Compulsory Licence – Section 84, Indian

Patents Act, 1970

The procedure for obtaining a compulsory licence under Section 84 is

quasi-judicial in nature and ensures compliance with principles of natural
justice. The steps are as follows:

1. Filing of Application

 An application is filed by any person interested in the prescribed

form (Form 14).

 The application can be made only after the expiry of three

years from the date of grant of the patent.

 The applicant must clearly state the grounds under Section 84(1).
2. Prior Efforts to Obtain Voluntary Licence

 The applicant must demonstrate that reasonable efforts were made

to obtain a voluntary licence from the patentee on reasonable
commercial terms.

 The applicant must show that such efforts were unsuccessful within
a reasonable period.

 This requirement may be waived in cases of national

emergency, extreme urgency, or public non-commercial use
(as provided under Section 92).

3. Notice to the Patentee

 Upon receiving the application, the Controller issues notice to the

patentee and other interested parties.

 The patentee is required to file a reply within the prescribed time

(generally three months).

4. Hearing of Parties

 Both the applicant and the patentee are given an opportunity to be

heard.

 The Controller examines:

o Whether statutory grounds under Section 84(1) are satisfied.

o The nature of the invention.

o Public interest considerations.

o The applicant’s capability to work the invention.

5. Decision and Grant of Licence

 If the Controller is satisfied that any of the statutory grounds are

established, a compulsory licence may be granted.

 The Controller determines the terms and conditions of the

licence, including:

o Royalty or remuneration payable to the patentee.

 o Scope and duration of the licence.

o Non-exclusive and non-assignable nature of the licence.

Terms and Conditions of Compulsory Licence

(Under the Indian Patents Act, 1970 – Sections 90 and related provisions)

When the Controller grants a compulsory licence, he determines its terms

and conditions to ensure a balance between the patentee’s rights and
public interest. The licence is subject to the following essential conditions:

1. Non-Exclusive Nature

The compulsory licence must be non-exclusive.

This means the patentee retains the right to:

 Continue working the patent; and

 Grant licences to other persons as well.

2. Non-Assignable

The licence is non-assignable, except along with the goodwill of the

business in which the patented invention is used.
This prevents commercial trading of compulsory licences as independent
assets.

3. Limited Scope and Duration

The licence must be:

 Limited to the purpose for which it is granted.

 Restricted in scope and duration.

 Subject to termination when the circumstances justifying it cease to

exist (as per Section 94).

4. Availability to the Public

The terms must ensure:

 Adequate working of the invention.

  Sufficient supply of the patented product.

 Availability of the invention to the public at reasonably affordable

prices.

The licensee is typically required to submit periodic reports regarding

the working of the invention.

5. Royalty / Remuneration to Patentee

The Controller must fix reasonable royalty or remuneration payable to

the patentee, taking into account:

 The nature of the invention.

 Investment made by the patentee.

 Public interest considerations.

 The need to make the product affordable.

In practice, royalty rates often range between 4% to 6% of net sales,

depending on the facts and circumstances of each case.

Revocation of Patent for Non-Working – Section 85, Indian Patents

Act, 1970

Section 85 provides a further safeguard to ensure that patents are not

misused or kept idle to the detriment of public interest.

When Can Revocation Be Sought?

An application for revocation may be made after the expiry of two

years from the date of grant of a compulsory licence, if:

1. The reasonable requirements of the public with respect to the

patented invention are still not satisfied; or

2. The patented invention is still not worked in the territory of

India.

Who May Apply?

Any person interested or the Central Government may apply to the

Controller for revocation of the patent.
Procedure

 The Controller issues notice to the patentee.

 The patentee is given an opportunity to be heard.

 After considering the facts and evidence, the Controller may revoke
the patent if satisfied that statutory conditions are fulfilled.

Purpose

Section 85 acts as a stronger remedy where even the grant of a

compulsory licence fails to achieve:

 Adequate public access, or

 Commercial working of the invention in India.

Thus, revocation under Section 85 ensures that patent protection is

conditional upon fulfilling public interest obligations and prevents
prolonged non-working or abuse of monopoly rights.

Special Types of Compulsory Licences

(Unit IV – Part III)

In addition to general compulsory licences under Section 84, the Indian

Patents Act, 1970 provides special categories of compulsory licences
under Sections 92 and 92A to address urgent public needs and
international public health obligations.

(A) Section 92 – Special Compulsory Licence (National

Emergency / Public Health)

When Applicable

Under Section 92, the Central Government may issue a notification

declaring that compulsory licences may be granted in situations such as:

 National emergency

 Extreme urgency

 Public non-commercial use

 Public health crises (e.g., epidemics such as HIV/AIDS, tuberculosis,

etc.)

 Anti-competitive practices
Key Features

1. No Prior Negotiation Required

Unlike Section 84, there is no requirement for the applicant to first
seek a voluntary licence from the patentee.

2. Government Notification
The power is triggered by a notification issued by the Central
Government.

3. Application to Controller
After notification, an application is made to the Controller for grant
of licence.

4. Predominant Domestic Supply

The licence is generally granted for supplying the domestic market.

5. Royalty Payable
Adequate remuneration must still be paid to the patentee.

Section 92 ensures rapid intervention in urgent public interest situations,

particularly in matters affecting public health and national welfare.

(B) Section 92A – Compulsory Licence for Export of

Pharmaceutical Products

Section 92A was introduced through the 2005 Amendment to the Indian
Patents Act to comply with the flexibilities permitted under the TRIPS
Agreement.

Purpose

To enable Indian manufacturers to produce and export patented

pharmaceutical products to countries that:

 Lack sufficient manufacturing capacity; and

 Require affordable medicines to address public health needs.

Conditions

1. Eligibility of Importing Country

The importing country must:

o Issue a notification permitting such import; and

 o Confirm insufficient manufacturing capacity.

2. Limited Scope
The licence is granted only for:

o Manufacture in India; and

o Export to the specified country.

3. Product Identification
The product must be:

o Clearly labelled;

o Distinguishable from products sold in India (to prevent

diversion).

4. Reporting Requirements
The licensee must provide regular reports to the Controller
regarding production and export.

Comparative Analysis of Compulsory Licensing Provisions

The following table provides a consolidated comparison of Sections 84, 92,

and 92A of the Indian Patents Act, 1970:

Prior
Provisi When Supply
Grounds Negotiation
on Available Focus
Requirement

Required (may
Unaffordable price; be waived in After 3 years
Section non-working of limited cases from date of Predominantl
84 patent; unmet under grant of y Domestic
public requirements emergency patent
provisions)

National
emergency; Any time
Section extreme urgency; after Central Domestic
Not required
92 public health crisis; Government Supply
anti-competitive notification
practices

Section Export of patented Not required Any time Export Only

92A pharmaceutical (subject to
products to statutory
countries lacking
 Prior
Provisi When Supply
Grounds Negotiation
on Available Focus
Requirement

manufacturing
conditions)
capacity

Key Distinctions

 Section 84 is the general compulsory licensing provision based on

failure of the patentee to meet statutory obligations.

 Section 92 is an emergency-based provision triggered by

government notification.

 Section 92A is a TRIPS-compliant provision allowing India to export

medicines to countries with insufficient manufacturing capability.

Together, these provisions demonstrate the flexibility of the Indian patent

regime in balancing patent protection with public health and national
interest concerns.

Terms, Review, and Revocation of Compulsory Licence

(Indian Patents Act, 1970)

The grant of a compulsory licence is not absolute or perpetual. The Act

provides safeguards regarding its duration, remuneration, review,
termination, and appeal to ensure fairness to both the patentee and the
licensee.

1. Duration and Scope of Licence

 A compulsory licence is limited in scope and duration.

 It is granted only for the purpose for which it is justified.

 The Controller may impose specific conditions regarding

manufacture, supply, pricing, and reporting.

The licence does not extinguish the patent; it merely permits regulated
use.

2. Royalty and Remuneration

The patentee is entitled to adequate remuneration, determined by the
Controller based on:

 The nature of the invention.

 Investment made by the patentee in research and development.

 The economic value of the licence.

 Public interest considerations and affordability.

Case Illustration

In Natco Pharma Ltd. v. Bayer Corporation, the Controller granted

India’s first compulsory licence for the cancer drug Nexavar and fixed
royalty at 6% of net sales payable to Bayer.

This case demonstrated the practical application of Section 84 and

established guiding principles on affordability and reasonable royalty.

3. Termination of Compulsory Licence (Section 94)

A compulsory licence may be terminated if:

 The circumstances that justified its grant cease to exist; and

 There is no likelihood of their recurrence.

However, termination must not prejudice the legitimate interests of

the licensee, especially where investments have been made in good
faith.

4. Revocation of Patent (Section 85)

If, after the expiry of two years from the grant of a compulsory
licence:

 The reasonable requirements of the public are still not satisfied; or

 The patented invention is still not worked in India,

the Controller may revoke the patent upon application by any person
interested or the Central Government.

Revocation is a stronger remedy, used where compulsory licensing fails to

correct non-working or public interest concerns.

5. Appeals
Orders of the Controller relating to the grant, refusal, terms, termination,
or revocation of compulsory licences are appealable before the High
Court.

This ensures judicial oversight and adherence to principles of natural

justice.

Grounds for Compulsory Licence under Section 84 of the Patents

Act, 1970

(Section 84(1)(b) and Section 84(1)(c))

Introduction

Section 84 of the Patents Act, 1970 provides for the grant of a compulsory
licence after three years from the date of grant of a patent. Among the
statutory grounds, two important ones are:

1. The patented invention is not available to the public at a reasonably

affordable price – Section 84(1)(b).

2. The patented invention is not worked in the territory of India –

Section 84(1)(c).

These grounds reflect the principles contained in Section 83, which

emphasize that patents are granted not merely to confer monopoly rights
but to ensure that inventions benefit society and contribute to economic
development.

I. Patented Invention Not Available at a Reasonably Affordable

Price

(Section 84(1)(b))

1. Meaning

This ground applies when the patented product or process is available in

India but is priced so high that it becomes inaccessible to the public.

The term “reasonably affordable price” is not defined in the Act; however,
it implies a price that is:

 Fair and just

 Not excessively high

 Affordable in the Indian economic context

Affordability is judged from the perspective of the public, particularly in
cases involving life-saving drugs or essential commodities.

2. Determination of Reasonableness

While assessing affordability, the Controller may consider:

 Manufacturing cost

 Nature and complexity of the invention

 Prices of comparable products

 Purchasing power of the public

 Public health considerations

The patentee is entitled to reasonable profit, but monopoly pricing that

defeats public access may justify compulsory licensing.

3. Judicial Application

In Natco Pharma Ltd. v. Bayer Corporation, the Controller granted

India’s first compulsory licence for a cancer drug.

The findings included:

 The drug was sold at an extremely high price.

 Only a negligible percentage of patients could afford it.

 The invention was not sufficiently accessible to the public.

The licence was granted with a royalty of 6% of net sales payable to the
patentee.

This case established that affordability must be evaluated in light of Indian

economic realities.

4. Legal Consequences

If this ground is satisfied:

 The Controller may grant a non-exclusive and non-assignable

licence.

 The patentee is entitled to adequate remuneration.

 Continued failure may lead to revocation under Section 85.

II. Patented Invention Not Worked in the Territory of India

(Section 84(1)(c))

1. Meaning of “Working”

“Working” refers to commercial exploitation of the patent in India. It

generally includes:

 Local manufacturing in India

 Licensing to Indian manufacturers

 Sufficient supply to meet public demand

Section 83 clarifies that patents are granted to ensure that inventions are
worked in India and not merely to enable import monopolies.

2. Importation vs. Local Manufacture

A significant issue is whether importation alone amounts to working.

The Indian approach emphasizes:

 Local manufacture is preferable.

 Mere import of limited quantities may not constitute sufficient

working.

 The patentee must justify why local production is not feasible.

Thus, if the invention is not commercially exploited in India to the fullest

practicable extent, compulsory licence may be granted.

3. Disclosure through Form 27

Patentees are required to submit annual statements (Form 27) indicating:

 Whether the patent is worked in India

 Quantity manufactured or imported

 Licensing details

Failure to adequately work the patent may attract compulsory licensing or

even revocation.

4. Judicial Position
In Natco Pharma Ltd. v. Bayer Corporation, the Controller observed
that:

 Mere importation of small quantities was insufficient.

 The invention must be worked to the fullest extent reasonably

practicable.

 Public demand must be adequately satisfied.

This clarified that symbolic or minimal working does not satisfy statutory
requirements.

Conclusion

Sections 84(1)(b) and 84(1)(c) ensure that patent rights in India are not
absolute. A patentee must:

 Make the invention available at a reasonably affordable price; and

 Work the invention in India to meet public demand.

If these obligations are not fulfilled, the Controller may intervene through
compulsory licensing. Thus, the Indian patent regime balances private
monopoly rights with public interest and socio-economic development.