COMPULSORY LICENSES
1. INTRODUCTION
Intellectual property rights (IPR) are structurally designed to grant
creators exclusive monopolies over their innovations, allowing
inventors to prevent third parties from unauthorized manufacturing
or commercialization. However, this framework faces a significant
policy crisis when absolute monopolies restrict public access to
essential commodities like life-saving pharmaceuticals and cultural
works. The structural tool used to resolve this policy crisis is
Compulsory Licensing (CL).
A compulsory license is a statutory mechanism that empowers a
state's competent authority to authorize a third party to
manufacture, use, or sell a patented invention or copyrighted work
without obtaining the explicit consent of the IP owner. This
instrument balances private innovator interests with critical public
welfare needs.
This assignment evaluates the statutory architecture of compulsory
licensing under India’s Patents Act, 1970 and Copyright Act,
1957, highlighting enforcement procedures, strategic impacts, and
landmark precedents.
2. THE PATENT LEGISLATIVE MATRIX: CHAPTER XVI OF
PATENTS ACT, 1970
The core legislative framework for patent compulsory licensing in
India is codified under Sections 84 to 94 of the Patents Act, 1970.
2.1. Statutory Grounds for Application: Section 84
By virtue of Section 84(1), any person interested can apply to the
Controller for a compulsory license once three years have elapsed
from the date of the patent grant, provided at least one of three
distinct conditions is met. First, the reasonable requirements of the
public with respect to the patented invention must not be satisfied.
Second, the patented invention must not be available to the public
at a reasonably affordable price. Third, the patented invention must
not be commercially worked within the territory of India.
The Controller must evaluate the applicant's intent, their capability
to command the commercial risk, and whether they made good-faith
efforts to secure a voluntary license from the patentee within a
reasonable timeframe. Furthermore, Section 84(7) defines a failure
to satisfy public requirements if the patentee's refusal prejudices
existing or developing trade, industry, or commercial market export
capabilities within India.
2.2. Special Provisions for Emergencies: Section 92 &
Section 92A
During public health crises, the traditional procedure can be
bypassed. Under Section 92, the Central Government can issue a
declaration through an official notification regarding the grant of a
compulsory license in cases of a national emergency, extreme
urgency, or public non-commercial use. Upon such a declaration, the
Controller can waive the regular notice-and-opposition mechanisms
under Section 87 to grant licenses immediately for public health
crises, including epidemics like HIV/AIDS, tuberculosis, or malaria.
Additionally, Section 92A allows for the compulsory licensing of
pharmaceutical products specifically intended for export to nations
with insufficient or completely absent manufacturing capabilities,
fulfilling India's humanitarian global health commitments.
3. THE ADMINISTRATIVE PROCEDURAL PATHWAY
The regular administrative path for securing and challenging a
compulsory license requires strict procedural steps managed by the
patent office. When an interested party files an application under
Section 84, the Controller must first review the information to
establish a prima facie satisfaction of the statutory grounds. If the
Controller is not satisfied, the application can be directly rejected. If
satisfied, the applicant is directed to serve a formal notice of the
application to the patent holder or any other person listed as an
interested party.
Following notice service, the application is officially published in the
journal. The patentee or any opponent can then file a notice of
opposition within the time prescribed by the Controller, detailing
their grounds of objection. The Controller is under a strict obligation
to notify the applicant of the opposition and must provide a formal
evidentiary hearing to both parties before passing a final order to
grant or deny the compulsory license.
4. KEY CONTROLLING CONDITIONS AND ECONOMIC
BALANCING
When settling the operational conditions of a compulsory license,
Section 90 mandates that the Controller preserve the economic
balance of corporate interests and public welfare through specific
guidelines:
Non-Exclusivity: The license granted must be strictly non-
exclusive, ensuring that the exclusive core rights remain
fundamentally with the patent holder.
Non-Assignability: The license right is strictly non-
assignable, meaning the third-party licensee cannot transfer or
sublease their privileges to outside entities.
Reasonable Royalty: The terms must secure a reasonable
royalty and remuneration reserved for the patent holder,
keeping in mind the nature of the invention and the
development costs incurred.
Domestic Market Focus: The production and supply
authorized under the license must be directed primarily toward
satisfying the demands of the Indian domestic market.
If the circumstances that gave rise to the license cease to exist and
are unlikely to recur, the patent holder can apply under Section 94
for termination. Conversely, if an authorized license remains
unworked after the expiration of two years from the grant of the first
compulsory license, the Central Government or any interested party
can apply under Section 85 for total revocation of the patent.
5. LANDMARK JURISPRUDENTIAL EVOLUTION IN PATENT
LAW
The operational boundaries of compulsory licensing in India have
been refined through historic corporate challenges.
5.1. The Precedent-Setting Dispute: Bayer Corporation v.
NATCO Pharma Ltd. (2012)1
India’s first granted compulsory license occurred during the high-
stakes dispute between Germany’s Bayer Corporation and India's
NATCO Pharma. Bayer owned the patent for Nexavar (Sorafenib
Tosylate), an essential drug used to treat advanced kidney and liver
cancers. While Bayer sold the drug at an exorbitant cost of around
₹2.8 Lakh per month, NATCO Pharma offered to manufacture and
distribute a generic version at a significantly reduced cost of
approximately ₹9,000 per month.
The Controller found that all three statutory grounds under Section
84 were fully satisfied. First, public demand was left unsatisfied
because Bayer imported minimal quantities, meeting the needs of
less than 3% of the target patient demographic. Second, the drug
was completely unaffordable to the general public. Third, the patent
was not being worked domestically through local production within
Indian territory. The Intellectual Property Appellate Board (IPAB)
upheld the Controller's decision, forcing NATCO to pay a 6% royalty
on generic sales to Bayer in accordance with international
guidelines, confirming that patents carry a social duty to serve
public health needs.
5.2. Strict Application of Thresholds: Lee Pharma v.
AstraZeneca (2015)
In contrast, the 2015 case of Lee Pharma v. AstraZeneca2
demonstrated that India does not grant compulsory licenses
1
Bayer Corp. v. Union of India, OA/21/2012/PT/CH (IPAB Mar. 4, 2013).
2
Lee Pharma v. AstraZeneca, Compulsory License Application No. 1 of 2015 (Controller
General of Patents, Mumbai, Jan. 19, 2016).
automatically. Lee Pharma sought a compulsory license for
Saxagliptin, a patented drug used to manage Type-II diabetes.
The Controller rejected the application, finding that Lee Pharma
failed to provide objective data showing that AstraZeneca's
manufacturing levels left public demands unfulfilled. Furthermore,
because several substitute generic alternatives for Type-II diabetes
management were already widely available at cheap rates in the
Indian market, the high threshold required by Section 84 was not
met.
6. COMPULSORY LICENSING IN COPYRIGHTS
The scope of compulsory licensing extends beyond patents to
prevent anticompetitive monopolies under Chapter VI of the
Copyright Act, 1957.
6.1. Statutory Refusal to Publicly Communicate: Section 31
Under Section 31, a complaint can be submitted to the Commercial
Court if a copyright owner refuses to republish, publicly perform, or
broadcast a work that has already been published or performed in
public. If the Commercial Court finds the owner's refusal has no
reasonable cause, it can direct the Registrar of Copyrights to grant a
license to the complainant, subject to paying a determined
compensation or royalty to the owner.
6.2. Missing Owners and Disability Rights Access
Section 31A (Published/Unpublished Works): If an author
is deceased, anonymous, or cannot be found alongside the
owner, a party can apply to the Commercial Court to publish or
communicate the work. This is done after running a mandatory
proposal advertisement in a major daily newspaper.
Section 31B (Disability Rights Access): Any person
working for profit or business on behalf of individuals with
disabilities can apply for a swift license to adapt copyrighted
material into accessible formats like Braille. The Commercial
Court is mandated to resolve these applications within two
months.
7. GLOBAL PERSPECTIVES AND COMPARATIVE
APPROACHES
The international legitimacy of compulsory licensing is grounded in
Article 31 of the TRIPS Agreement, which allows member nations to
utilize patented inventions without the owner's authorization under
exceptional circumstances. This mechanism was later reinforced by
the Doha Declaration, which affirmed that member nations retain
the sovereign right to define their own public health thresholds and
grounds for granting licenses.
While countries like India and the United Kingdom have clear
statutory provisions for compulsory licensing built directly into their
domestic laws, the United States takes a different path. The US
patent code does not expressly establish a general compulsory
licensing framework. Instead, under federal acts like the Bayh-Dole
Act, the US government relies on specialized remedies, retaining a
non-exclusive, paid-up right to use or manufacture inventions
developed through public funds to address national health and
safety emergencies.
8. CONCLUSION AND RECOMMENDATIONS
Compulsory licensing remains a powerful policy tool for developing
nations, preventing the concentration of market power and keeping
life-saving medications affordable. However, its use can draw
international criticism from developed economies, who argue that
over-application discourages long-term investment in corporate
research and development.
To optimize this legal framework, India should adopt the following
balanced, structural updates:
1. Clarify Predictable Royalty Standards: The patent rules
should be updated to establish clear, predictable royalty
ranges for licensees, using international metrics to ensure
patent holders receive fair compensation.
2. Implement Digital Portals for Copyright Applications:
The copyright licensing process under Sections 31 and 31A
should be shifted to a streamlined online system to accelerate
public access to educational materials.
3. Encourage Voluntary Partnerships: The state should
encourage voluntary, collaborative licensing programs before
moving to mandatory interventions, positioning compulsory
licenses as a secondary check against anticompetitive pricing
rather than a primary regulatory option.
REFERENCES
A. Statutes
1. The Patents Act, 1970 (Act No. 39 of 1970).
2. The Copyright Act, 1957 (Act No. 14 of 1957).
3. Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS), 1994.
B. Books and Articles
1. M.K. Bhandari, Law Relating to Intellectual Property Rights (5th
ed. 2021).
2. B.L. Wadehra, Law Relating to Intellectual Property (5th ed.
2016).
3. Allapureddy Vaishnavi, Basic Concept of Compulsory License
and Government Use of Patent, LawBhoomi (May 22, 2021),
[Link]
government-use-of-patent/.
4. Monesh Mehndiratta, Compulsory Licensing in IPR, iPleaders
(May 16, 2024), [Link]
license-patents-act-1970/.
5. What is Compulsory License?, BYJU'S Free IAS Prep (Aug. 2,
2024), [Link]
C. Judicial Precedents
1. Bayer Corp. v. Union of India, OA/21/2012/PT/CH (IPAB Mar. 4,
2013).
2. Lee Pharma v. AstraZeneca, Compulsory License Application
No. 1 of 2015 (Controller General of Patents, Mumbai, Jan. 19,
2016).