UILS, PANJAB UNIVERSITY, CHANDIGARH

INTELLECTUAL PROPERTY RIGHTS

LAW PROJECT REPORT ON

Infringement of patents and

compulsory licensing

Submitted To: Submitted By:

Mrs. Kritika Shubham Kumar
UILS, P.U. B.Com.LL.B.(Hons.)
Chandigarh Section-C
Roll No.- 158/13
 ACKNOWLEDGEMENT
I would like to take this opportunity to thank everyone who put forth their time and efforts to
help me to develop this project. This project took a long time from the collection of
information to the compilation.

This project could not have been written without the guidance of Mrs. Kritika who not only
served as our supervisor but also encouraged us to make this project report.

I would also like thank library staff of University Institute of Legal Studies for helping us
through study material and books.

Thank you!

-Shubham Kumar
 TABLE OF INDEX
INFRINGEMENT OF PATENTS

 INTRODUCTION
 CONCEPTUAL ANALYSIS
 DEFENCES TO PATENT INFRINGEMENT

COMPULSORY LICENSING

 INTRODUCTION
 ORIGINS OF COMPULSORY LICENSING
 COMPULSORY LICENSING IN INDIA
 CASE ANALYSIS
 CONCLUSION
 INFRINGEMENT OF PATENT

Introduction:

A Patent confers the exclusive right on the patentee to make, distribute or sell the
invention in India. The law of patents is all about stopping people from doing things. Though
the expression ‘Infringement’ is not defined under the Patents Act, it is understood to mean
any intrusion into the ‘scope of the invention for which protection is claimed’. Infringement
of patent refers to any of those acts which violate the rights of a patentee, against which the
patentee has a remedy. An infringement would be when any of three rights is violated. A
patentee may assign license all or some of these rights. The exercise of the rights so
transferred in favour of the assignee or the licensee by the assignor or the licensor would not
amount to infringement of the patents. In case of a product patents rights of the patentee are
infringed by anyone who makes or supplies that substance commercially. In case of a
process patent, the use of such a method or process in India by anyone other than the patentee
amounts to infringement.
 Conceptual Analysis

Infringement of a Patent

A person will be liable for patent infringement, if he exercises any of the exclusive rights
over a patented invention without the patent holder’s permission within the territory of India.
A product or process is said to infringe a patent granted in India if the following conditions
are satisfied:

1. The product or process in question falls within the scope of at least one claim in the
patent; and,
2. The person exercises the exclusive rights of patent holder over the product or process
in India, without permission from the patent holder.

Types of Infringement:

i. Literal Infringement: A product is said to be literally infringing if all elements of a

patent claim are present in the product, and a process is said to be literally
infringing if all steps in a claim are present in the process.
ii. Infringement by Equivalence: Though a product or process is not literally
infringing, it may be liable for infringement by equivalence. A product is said to
be liable for infringement by equivalence, if elements in the product that differ
from the patent claim are in substance equivalent to the elements in the patent
claim. A process is said to be infringing by equivalence if the steps differing from
those in the patent. In other words, a product or process that includes the
substance of the patented invention or the pith and marrow of the invention, would
be infringing. A product will be considered to be equivalent of a patented
invention, if it is similar in construction and function to the patented invention.
Furthermore, if a product does the same work in the same way to produce the
same result as the patented invention, it would be considered to be equivalent of
the patented invention.
Determination of Infringement

An infringement is an attack on the invention for which protection is claimed. The Patents
Act defines an invention as a new product or process involving an inventive step and capable
of industrial application. The subject matter of protection is contained in the claim of a
specification which defines the scope of the invention. Thus, to determine infringement, one
has to ascertain whether the alleged act came within scope of the specifications and the
claims. This will involve construction of the patent. An act amounts to infringement only if it
falls within the scope of the claims. If the alleged process or product did not fall within the
scope of the claim, there can be no infringement.

(1) Act within the scope of the Invention

The first step in determining whether there has been an infringement of a patent would be to
determine the scope of protection offered to the invention. A patent protects the invention
which is claimed in the claim. The scope of the claim has to be determined by construing the
specification as a whole. As issues of validity and infringement are likely to arise in the same
proceedings, the standards of construction must necessarily be the same in revocation and
infringement proceedings. To constitute infringement, the infringing process or product
should fall within the claim, as constructed by the court. As whatever is not claimed is treated
as being disclaimed, any person will be free to employ a process or a product which does not
fall within the claims of a patent.

(2) Act violates the Rights of the Patentee

The second step involves a determination whether the alleged act violated any right of the
patentee under section 48 of the Patents Act. Section 48 details the rights of a patentee in
respect of a product patent and a process patent. But the rights of a patentee under section 48
can be enforced only during the term of the patent. Thus, before determining the rights of a
patentee, it must be ensured that the patent in respect of which infringement is allege is valid
and subsisting.

A. Infringements During the Term of a Patent

Only infringements that occur during the term of a patent are actionable. The right to take
action on infringement accrues only after the date of publication of the application. Section
11A(7) considers an application ‘as published’ as well as a patent ‘as granted’.
The effect of the said section is to confer on the patentee for the period during the publication
and the grant, the same rights as if the patent were granted at the beginning of the said period,
i.e. date of publication. The alleged act should have infringed the patent as granted and the
claims in the claims in the application as it were before they were published. An infringement
action would lie only if there is infringement of the claims as published and as granted. In
ascertaining the rights of a patentee to sue, both the scope of the claim as published and as
granted have to be determined.

B. Rights of a Patentee protected against Infringement

The acts that constitute infringement are essentially the acts which violate the right of a
patentee under the Patents Act. The rights of a patentee are detailed in section 48 of the
Patents Act.

(i) ‘Without consent’

An act which violates the right of a patentee must be done without the consent of the
patentee. In other words, only an act done without the consent of the patentee will amount to
an infringement. Where the act is done under an assignment or a license, it cannot be said that
such an act is done without consent. Following the instructions given by the patentee in the
form of directions to do what is claimed in the patent will amount to infringement. But where
the patentee gave no instructions to the defendant to do a specific act, the defendant’s act of
repairing the product of the patentee will amount to infringement.1

(ii) ‘In India’

Section 48 of the patents act states that the rights of a patentee shall pertain to acts done in
India. The exclusive right of the patentee to prevent third parties is limited to acts of
infringement committed within India, as the operation of the Patents act is territorial in
nature. The jurisdiction will be determined according to the place where the tortuous act of
infringement is performing. Section 107A excludes from the scope of infringement certain
acts which may amount to indirect infringement.

1
Dunlop Pneumatic Tyre Co v. Neal (1899) 16 RPC 247
C. Infringement of Products and Progress

The Patents Act clearly distinguishes the rights in process patents and product patent. The
alleged act could infringe which pertains to a product or a process.

(i) Infringement of a Product

Where the Subject matter of the patent is a product, any act by a third party, of making,
using, offering for sale, selling or importing for those purposes, such product in India,
without the consent of the patentee, will amount to infringement,

(a) 'Making'

Making of a patented product without the consent of the patentee will amount to
infringement. Similarly, making and selling separate parts of a patented instrument, whose
parts can be put together without any difficulty by any ordinary skilled workmen, will
constitute an infringement of the patented product.2 The person who manufactures the parts
and the customers who assemble will be liable as joint tortfeasors. However, the making of
an article which per se does not infringe a patent, but may be used for infringing a patent, will
not amount to infringement of the patent.

(b) ‘Using’

Possession with the intention of ‘using’ the articles for trade purposes and for the securing of
a profit would amount to an infringement. But possession by a carrier or a warehouseman,
who innocently carried or stored the infringing goods for a consignor or consignee, will not
amount to an infringement. An injunction, in respect of a patented product, may be granted
even if there is no actual infringement by the user of the product. Even if there is no actual
use an injunction may be granted where there is a threat of potential use. Application to the
regulatory authority for approval to market the product will not however come under the
ambit of use. It will difficult to include mere use of the information with regard to the product
under this provision.

(c) ‘Offering for sale’

‘Offering for sale’ would include an advertisement or a pre-contractual negotiation to supply

a patented product. If, pursuant to the offer, the supply of the product happens during the

2
United Telephone Co v. Dale (1884) 25 Ch D 778
term of the patent, it would certainly amount to infringement may be obtained to restrain such
acts. But negotiations during the term of a patent to supply after the expiry of the patent will
not amount to infringement.

(d) ‘Selling’

If the patentee sells the article without any clear and express limitation, the buyer will be
entitled to do as he pleases. In the case of patented products sold by a license, the extent to
which the extent to which the article is released from the patentee’s patent rights will depend
on the extent of the authority conferred by the license. If the patentee has assigned his rights
in the patent, the patentee will not be allowed to manufacture the product abroad and import
them to sell the same in a country where the said patent has already been assigned. Though
export of an article will not come under the ambit of ‘selling’, the acts that precede an export
will usually be accompanied by infringing acts like ‘importing with a view of selling in
export market’, ‘purchase and possession with a view to sale’, etc. An injunction may be
granted to restrain the defendants from exporting the allegedly infringing goods.

(e) ‘Importing’

‘Importing’ should be understood in the context in which it is used in s 48(a) of the Patents
Act. What is covered under the said subsection is the import for the purposes of ‘making,
using, offering for sale or selling’ a product in India without the consent of the patentee.
Where the subject matter that is imported is covered by a patent, for the purpose of
distributing and selling them in a country, it would amount to infringement of that patent.3
Both the vendor and the purchaser will be liable for infringement. Regardless of the person in
whom the property in the goods vested, they would be jointly implicated in a transaction the
effect of which was to infringe the patent law of the country, and they will both be liable as
principals in the transaction. In determining an importer, the court shall have regard to the
person who has possession to the title of the goods.

The act of importing a patented product for uses relating to the development and submission
of information required under any law in India or abroad that regulates the import of any
product will not amount to an infringement. Similarly, the importation of patented products
by any person from a person who is duly authorised under the law to produce and sell or
distribute the product will also not amount to an infringement of such a product.

3
Pfizer Corpn v. Ministry of Health [1965] AC 512
(ii) Infringement of a process

Where the subject matter of the patent is a process, any act by a third party, of using that
process and the act of using, offering for sale, selling or importing for those purposes the
product obtained directly by that process in India, without the consent of the patentee will
amount to an infringement.

(a) Use of the Process

The use of a patented process can amount to an infringement of that process. The use of the
process is different from use of information relating to the process.

(b) ‘Product obtained directly from that Process’

Section 48(b) also covers the act of ‘using, offering for sale, selling or importing’ for the
above purposes the product obtained directly by a patented process in India. The expressions
‘using’, ‘offering for sale’, ‘selling’ and ‘importing’ will take the same meaning as in s 48(a).
The expression ‘obtained directly’ will mean obtained without an intermediary. It would
signify products which are the direct and immediate result of applying the process. The
product will be considered to have been ‘obtained directly’ even if the product is subject to
further processing such that it does not lose its identity and retained its essential
characteristics. But if the output of a patented process was transformed by further processing
into an inseparable component of a composite object, it can no longer be regarded as a
product directly obtained by a process. The requirement of ‘obtained directly’ appears to have
altered the earlier position of law, as decided by the courts in the United Kingdom, where
infringement can be established if an imported product has been directly or indirectly
obtained from a patented process, provided always that substantial use had been made of it.

Jurisdiction

The district court will have jurisdiction over a suit relating to patent infringement. If a
defendant in an infringement suit counter-claims for revocation of a patent, the case will then
be transferred to the High Court. The decision of a district court is appealable to the High
Court. An appeal from a decision of the high court may be filed before the Supreme Court.
 Persons Entitled to Sue

An infringement suit may generally be filed by the holder of a patent or his assignee. The
holder of an exclusive license may also file an infringement suit for acts committed by any
person after the patent licence. Such a licensee will be eligible for costs, damages, and lost
profits. If the patent holder does not cooperate or join with the exclusive licensee as a
plaintiff in such an infringement suit, he will be added as a defendant will not be liable for
costs unless the patent holder takes part in the proceedings.

Proof of Infringement

Infringement involves a mixed question of fact and law. 4 The burden of proving infringement
is not the patentee who files the suit for infringement. As the standard of proof for
establishing infringement is based on the balance of probabilities, the plaintiff has to produce
such evidence before the court. The burden of proof with regard to an article manufactured
abroad will lie on the patentee. This holds true in the case of process as well as product
patents. The defendant is not expected to show proof of non-infringement, but the court may
draw an adverse inference if material which could throw light on infringement was disposed
of. In the case of process patents, if the patentee is able to demonstrate that all the process of
making that article were patented by the patentee and there was no other known way of
manufacturing the article, it would be upon the defendant to show that the articles were made
by a different method than that of the patentee’s. The Patents Act makes an exception in the
case of process patents involving new products.

A. Burden of proof in Process Patents for New Products

Section 104A of the patents Act was introduced by the Patents (Amendment) Act 2002. The
said section shifts the burden on the defendant. The above section will apply only in case of
processes that result in new products. Section 104A reads as follows:

B. Burden of proof in case of suits concerning infringement-

(1) In any suit for infringement of a patent, where the subject matter of patent is a process
for obtaining a product, the court may direct the defendant to prove that the process

4
Lallubhai Chakubhai Jariwala v. Chimanlal Chunilal & Co AIR 1936 Bom 99
 used by him to obtain the product, identical to the product of the patented process, is
different from the patented process if,-

(a) The subject matter of the patent is a process for obtaining a new product; or

(b) There is a substantial likelihood that the identical product is made by the process, and
the patentee or a person deriving title or interest in the patent from him., has been
unable through reasonable efforts to determine the process actually used:

Provided that the patentee or a reason deriving title or interest in the patent from him, first
proves that the product is identical to the product directly obtained by the patented process.

(2) In considering whether a party has discharged the burden imposed upon him by sub-
section(1), the court shall not require him to disclose any manufacturing or
commercial secrets, if it appears to the court that it would be unreasonable to do so.

The obligation on the defendant is to show that the product was not produced by a patented
process. Section 104A states that the burden of proving that the process by which the
defendant prepared the substance in issue will be on the defendant as the knowledge about
this would specially be with the defendant. Even before the above provision came into effect,
in Farbwerke Hoechst AG v Unichem Laboratories,5 the Bombay High Court had held
that the burden of proving a particular fact rested on the defendant

Laxmi dutt roop chand v. Nankau and ors,6 In this case, the Appellant, laxmi Dutt Roop
Chand, was the patent holder of a patent relating to the process of manufacture of hollow-
ware, such as lotas, batwas,degchis, batlois and so on. The Appellant filed a patent
infringement suit against the respondents, Nankau and others, claiming that their process of
manufacturing hollow-ware using the process. In response to the infringement suit of the
Appellants, the Respondents claimed non-infringement and counter-claimed for revocation of
the patent. The court compared the claims of the patent with the process being used by the
respondents and held that the Respondents were nor liable for patent infringement because
their process does not fall within the scope of patent claims. The court differentiated the
process of the Respondents from the claimed in the Appellant’s patent. Based on the
comparison and evidence submitted, the court held that the process of the respondents had
different steps from that of the appellant and, therefore, was not infringing.

5
(1969) RPC 55, p 59, AIR 1969 Bom. 255
6
AIR 1964 ALL 27
Defences to Patent Infringement

The patents act excludes certain acts from amounting to infringement. Section 47 states that a
patent is granted under the patents act subject to the four conditions mentioned therein. The
performance of any of them will not amount to an infringement of a patent. Section 49
protects patents used in a foreign vessel, aircraft or vehicle from infringement under the
patents act. Section 107 states that the grounds of revocation under s 64 may be raised as a
defence in a suit for infringement. Under s 140(3), it will be a defence against infringement to
prove that at the time of infringement, there was in force a contract containing a restrictive
condition declared void under s 140. The above provisions are discussed below in detail.

(A) Government Use: Sections 47(1) and 47(2)

A patent is granted subject to the condition that the government may employ it for its own
use. Any process or product which is the subject matter of a patent may be imported or made
by the government for its own use. These acts shall not amount to an infringement of a
patent.

(B) Experiment and Research: Section 47(3)

A patent is granted subject to the condition that any person may make or use any patented
product or a product made by a patented process or use a patented process for the purpose of
experiment or research. Imparting instructions to pupils is expressly covered under the sub-
section. The ambit of the expression ‘experiment’ will be understood better when one reads it
along with the expression ‘research’ as it appears in the sub-section. The kinds of experiment
contemplated in this exception are the ones that lead to finding out something that is
unknown.

Experiment and research should be of such nature that the act must be done in relation to the
subject matter of the invention found in the claims of the patent alleged to be infringed. It
should have a real and direct connection to the claimed subject matter of the patent in suit.
But if an infringing product is sold for use in experiments, the vendor will be liable for
infringement. Similarly, if a pirated article is purchased and put to use for instructing pupils
who ‘pull them to pieces or experiment with them’, such use was not mere experimental use
but an infringement.

The provision of s 47(3) should be read in the light of s 107A(a) which allows experiments or
research to be conducted ‘for uses reasonably related to the development and submission of
information required under any law’.

(C) Import of Medicine or Drug: Section 47(4)

A patent in respect of any medicine or drug is granted subject to the condition that the
government may import such medicine or drug for its own use or for distribution in any
dispensary, hospital or other medical institution maintained by or on behalf of the
government or any other dispensary, hospital or other medical institution which the central
government, having regard to the public service rendered by such institution, may specify in
the official gazette.

(D) Patents in Foreign Vessels, Aircrafts, Vehicles: Section 49

The acts mentioned in s 49 of the patents act will not amount to an infringement. The section
deals with inventions that may be a part of a vessel, an aircraft or a land vehicle that comes
into India temporarily or accidentally. The rights conferred by a patent for an invention shall
not be deemed to be infringed by the use of the invention in the body of the vessel or in the
construction or working of the aircraft or land vehicle. The provision protects ships involved
in inter-state passage. The expression ‘temporarily’ refers to entry that is transient or for a
limited period of time. The fact that the same journey is repeated over and over again into the
territorial waters does not alter the temporary nature of the entry. The section works on the
principle of reciprocity.

(E) ‘Bolar exemptions’ and ‘Parallel importation’: Section 107A

Section 107A introduced provisions relating to ‘Bolar Exemptions’ and ‘Parallel imports’
into the patents act. Though the provisions of s107A are worded in general terms to apply to
all inventions in all fields of technology, it is more likely to affect pharmaceuticals.

(a) Acts for procuring Regulatory Approval

Section 107A (a) exempts certain acts done for procuring regulatory approval with regard to
patented products during the life of the patent. It incorporates what is commonly known as
the ‘Bolar exemptions’. Bolar exemptions are found in the laws of other countries as well.7
Even countries which do not have an express legislative provision have allowed for clinically

7
Roche Products Inc v. Bolar Pharmaceuticals Co Inc 221 USPQ 937
trials of a patented drug during the patent term and have refused to hold such use as
infringement on the basis that such trials would come within the purview of experimentation
privilege. Section 107A(a) allows generic companies to bring cheaper generic versions of a
patented product into the market soon after the expiry of the patent. It enables generic
companies to undertake activities prior to the patent. It enables generic companies to
undertake activities prior to the patent expiry which would otherwise amount to infringement.
All kinds of pharmaceutical research will be covered by the above provision.

(b) International Exhaustion of Rights

Section 107A(b) deals with international exhaustion of patent rights. This provision is based
on the principles of ‘exhaustion of rights’ which states that when patented goods are sold by
the patentee, the patentee shall have no further control over them. It follows that once there is
international exhaustion of patent rights; importation of the same should be allowed. ‘Parallel
importation’ refers to the importation of patented products from a country in which the
products are legally on the market. Article 6 of the TRIPS agreement specifically states that
the dispute settlement mechanism under the TRIPS agreement shall not be used to address the
issue of exhaustion of intellectual property rights. This gives the WTO member countries the
liberty to incorporate international exhaustion into their national law and the same cannot be
objected to by other members by invoking the dispute settlement mechanism. The only way
in which a provision on international exhaustion can be challenged invoking the TRIPS
agreement, would be on the ground that international exhaustion is selectively applied to
pharmaceuticals by violating the mandate of art 27 of the TRIPS agreement. The general
language in which s 107A (b) is worded would make it impossible to challenge the provision
on the ground that it selectively discriminates pharmaceuticals from other fields of
technology. Thus the provision enables the importation of parented products by any person
from a person who is duly authorized under the law to produce and sell or distribute the
product. Such an act of importation will not amount to infringement.
 COMPULSORY LICENSE

INTRODUCTION

A compulsory license is a prime example of an instrument that threatens pharmaceutical

companies’ ability to manufacture new drugs. The practice of granting compulsory license is
an exception to the general rule that patent holders have an exclusive right over their novel
invention. In this situation authorization is given to take advantage of an invention without
the patent holder’s consent.

The purpose of a compulsory license is to increase access to indispensable goods by

providing a wider use of the invention than the patent holder intended. As a result, the patent
holder is compulsorily required to give up a large part of his property right for the purported
benefit of the public. The issuance of a compulsory license comes at a high price in the world
of pharmaceutical sector. The patent holder’s investment-backed expectation of earning a
profit from the patented medicine is disrupted when his exclusive right over his patented
product disappears8.

The need for compulsory licensing can be easily understood the by the following example: In
1769, James Watt was granted a patent for his tremendous improvement of steam engine
technology which led to the wide use of efficient steam power across many industries, and in
fact became absolutely fundamental to the industrial revolution. Watt monopolized his
invention and prevented others- notably William Murdoch (his employee) and Jonathan
Hornblower (a rival inventor) – from further developing steam technology. It has been
suggested that had Watt’s patent been compulsorily licensed, society would have benefited
from efficient steam engines at least ten years earlier than it did.

There are a number of reasons as to why the compulsory licenses should be granted even
though they are against the right holder who have put in their best efforts for that invention
creation and getting it patented.

The major reasons which can be put forward in this respect are as mentioned below:

8
Dhara Doshi , Compulsory License Regime of Intellectual Property Rights With Reference to TRIPS,
http://www.manupatrafast.com/
 i. If patented drugs are unaffordable and/or unavailable, a compulsory license for local
production is often the only solution to solve procurement problems, increase local
availability of drugs and save on costs for patients and the national health budget.9
ii. It ensures dissemination of technologies, knowledge and supports development in
totality.
iii. Compulsory License ensures access to products and processes whether or not
monopoly holder agrees.
iv. Presence of lucid, workable provisions of Compulsory Licensing has a distinct
advantage of creating an atmosphere to encourage grant of contractual licenses.
v. Compulsory Licensing not only provides opportunities for competition but also
maintains the growth opportunities for the generics.
vi. Compulsory Licensing provisions raise consumer confidence in the patent system
and reinforce their belief in existing political set up which is necessary for social
tranquility and political stability.
vii. It gives a message to the world at large that the sovereign supreme exists and very
much cares for the subjects of the nation and continues to abide by the primary duty
of providing safety to subjects and assurance of their lives.10

9
"Should compulsory licensing be allowed?” – The Times of India (14th March, 2012)
10
Utilitarian Aspects of Compulsory Licensing (P- 232-238):”Compulsory Licensing In Knowledge Economy
By Milind. V. Sathe – Satyam Law International- 1st Edition, 2012
 ORIGINS OF COMPULSORY LICENSING

Compulsory licensing can be traced back to the UK Statute of Monopolies in 1624 which
ruled out monopolies associated with patent. However compulsory licensing only became an
official proposal in the early 19th century. Countries in Europe (example the UK) popularized
compulsory licensing under its anti-patent movements in the 1850s11.

Article 5 A(2) of the Paris Convention of 1883 provides that “Each country of the Union shall
have the right to adopt legislative measures providing for the grant of compulsory licenses to
thwart the abuses which might result from the exercise of the exclusive rights conferred by
the patent., for example, failure to work.” During the World Wars, compulsory licensing was
resorted to for the purpose of sharing aviation technology and the manufacture of various
drugs like penicillin.

Since the 1990s particularly, after signing of the TRIPS agreement in 1995, compulsory
licensing stipulation has become an obligation of nations to deal with non-working issues,
consider public interest, and handle noncommercial use and unfair competition. Further to
this step, it was Doha Declaration which paid detailed attention to patented drugs that could
cure wide spread fatal diseases12.

In consequence, compulsory licensing could be issued in developed countries to manufacture

patented drugs on condition for export to least developed countries to treat epidemic diseases.
However compulsory licensing may also be issued by a government for noncommercial
public use or as a remedy to anti-competitive practice. Since 1995 it is mandatory for WTO
members to include compulsory licensing as part of their patent law stipulation.

The TRIPs Agreement notes that its patent provisions must comply with the Paris Convention
of 1967. Under the Paris Convention,’ the term “patent” is interpreted broadly to encompass
all forms of patent laws created within its member nations.

The Paris Convention applies to the protection of industrial property and includes13:

 Patents for 12 months;

 Utility models - not available in India;

11
Intellectual Property Rights – A Critical History: Christopher May and Susan Sell. Viva Books 2008
12
Dhara Doshi , Compulsory License Regime of Intellectual Property Rights With Reference to TRIPS,
http://www.manupatrafast.com/
13
http://www.rkdewan.com/iprOverviewTrademarkParisConvention.jsp
  Industrial designs for 6 months;
 Trademarks, service marks and trade names for 6 months;
 Indication of source or appellations of origin (this is same as the geographical
indications adopted in TRIPS).

TRIPS Agreement

The WTO, in December 1994, approved an important treaty the Trade-Related Aspects of
Intellectual Property Rights (TRIPS Agreement) which came into effect on January 1, 1995.
Primary objective of TRIPS Agreement was to minimize the distortions and impediments to
global trade by giving due importance to protection of IPRs. It provided for minimum
standards to harmonize divergent domestic laws of the WTO member countries and provided
mandatory rights for right holders. It required all WTO member states to adopt Regulations
relating to IPRs as laid down in the treaty. TRIPS Agreement did not repeal Paris
Convention. Rather it incorporated Paris Convention under its Article 2(1)6 and both apply
on equal footing.

TRIPS, however, provided for higher standards of Intellectual Property protection and it is
difficult to reconcile Article 27(1) of TRIPS with Article 5(A) of the Paris Convention. The
TRIPS Agreement, under Article 27(1), provides that the signatory states are obliged to
protect any innovations, whether products or processes, in all fields of technology. Before
1995, when TRIPS Agreement was not concluded, almost 50 countries had excluded drugs
from patentability. But TRIPS Agreement prohibited any such exclusion.

To enjoy protection, the invention must fulfill three conditions namely, “it must be new, it
involves an inventive step, and it is capable of industrial application”. Moreover, TRIPS
Agreement, under Article 28, provides the patent holders exclusive rights to prevent third
parties from making, using, offering for sale, selling or importing patented products without
consent of the patent holder. These monopoly rights are provided to the patent holders for a
period of twenty years. The pharmaceutical patent protection, however, works well only in
high income countries with citizens having purchasing power to buy expensive patented
pharmaceuticals. It does not work well in developing and least developed countries because
of different factors, affordable access to medicines being the most important of them.
Keeping in view the practical implications of patent protection in third world countries,
TRIPS Agreement provides mechanisms to poorer countries to override patents through
legitimate means.

Compulsory licenses are granted more frequently in countries which in their national laws
provide for special compulsory licensing provisions for pharmaceutical and food patents.
Even where compulsory licensing provisions are rarely or never used, it is reasonable to
assume that the presence of such provisions has significance in the patent system. Owing to
the threat of compulsory licensing, patent owners negotiate licenses that they would
otherwise refuse to negotiate.
 COMPULSORY LICENSING IN INDIA

The relevant system of compulsory licensing is contained in Ch. XVI of the Indian Patent Act
comprising Sections 82 to 94. The grounds, on which a compulsory license can be granted
under the Act, can be subdivided into the following categories:

(i) Abuse of patent rights (dealt with broadly under Section 84);
(ii) ‘Public Interest’ (dealt with broadly under Section 92).
(iii) New Grounds introduced by the 2005 amendments.
(iv) Other provisions on compulsory licensing such as Section 91, dealing with the
licensing of related patents.

As per Section 84, any person who is interested or already the holder of the license under the
patent can make a request to the Controller for grant of Compulsory License on patent after
three years from the date of grant of that patent, on the existence of the following conditions:

 The reasonable requirements of the public with respect to the patented invention have
not been satisfied
 The patented invention is not available to the public at a reasonably affordable price
 The patented invention is not worked in the territory of India.

The Controller, while granting compulsory license is required to take into account factors
such as the nature of the invention, measures already taken by the patentees or any licensee to
make full use of the invention, ability of the applicant to work the invention to the public
advantage, time elapsed since the grant of the patent, and so on14.

In addition to this, according to Section 92 of the Act, compulsory licenses can also be issued
suo motu by the Controller of Patents pursuant to a notification issued by the Central
Government if there is either a “national emergency” or “extreme urgency” or in cases of
“public non-commercial use”. The mechanism under this provision is set in motion by the
Central Government when it notifies in the Official Gazette that extra-ordinary circumstances
have dictated the grant of compulsory licenses in relation to patents which help to address the
exigency. However, Section 92(2) still requires a person interested to apply to the Controller
for grant of a compulsory license.

14
Compulsory Licensing in India, http://www.selvamandselvam.in/compulsory-licensing-in-india/
 CASE ANALYSIS

India’s first and only compulsory license till date was granted by the Patent Office on March
9, 2012, to Natco Pharma, an Indian company, for the generic production of Bayer
Corporation’s Nexavar, a drug used for the treatment of Liver and Kidney cancer. The three
grounds mentioned under Section 84 of the Indian Patent Act were all met, i.e. Bayer’s drug
left the reasonable requirements of the public were unsatisfied, it was not available to the
public at a reasonably affordable price, and the patented invention was not being worked in
the territory of India. While Bayer offered the drug at the cost of Rs. 2.8 lakh for a month’s
therapy, Natco Pharma had offered to sell the medicine at merely a fraction of that cost (Rs.
8,800). The decision of this case indicated that as opposed to maintaining an extremely strict
patent protection regime, the interest of public at large would be given more importance by
the government. However, the decision also invited harsh criticisms from the large group of
multinational companies, who felt that the issue of compulsory licenses ought to be exercised
in an even more stringent manner.

At a time where global pharmaceutical mergers are subject to intense scrutiny by the Indian
Government and the marketing policies of the pharmaceutical industry are being debated by
the Indian bureaucracy, the grant of India’s first compulsory license in this sector has
certainly raised eyebrows15. The Natco Pharma decision has already resulted in an adverse
perception of the Indian pharmaceutical industry and may adversely impact foreign
investment in this sector. The decision sets the precedent for making expensive patented
drugs available for compulsory licensing under the Patents Act.

More recently, Mumbai-based BDR Pharmaceuticals has been seeking the grant of
compulsory license for the generic production of US drug maker Bristol-Myers Squibb’s
anticancer drug Dasatinib, sold under the brand name Sprycel. The Patent Office rejected
BDR’s application on the grounds that the company did not make enough efforts to obtain a
voluntary license for the drug. While this rejection was lauded by the international
community and the multinational companies in particular, it seems that the issue of a
compulsory license for the drug may very well be on the cards, as citing the emergency of a
public health crisis under Section 92 of the Patent Act, the Health Ministry has reportedly
sought a waiver of patent rights for Dasatinib. Through a letter to the Department of
Industrial Policy and Promotion (DIPP), the Health Ministry has allegedly stated that the cost

15
Natco vs. Bayer ( Controller of Patents, 2012) Case Analysis, www.academia.edu
of producing the drug will be met through government schemes and that around half-a-dozen
schemes will be initiated to fund the cost of making the drugs available to patients for public
non-commercial use16.

CONCLUSION

With the introduction of a product patent regime in 2005 for pharmaceuticals, and the
consequent increase in patent scope thereof, concerns of compulsory licensing have assumed
great significance in India.

In terms of the current compulsory licensing regime and whether it can adequately cater to
national concerns, the verdict is far from clear. The ‘local working requirement’, which
seems to have been the cornerstone of the Indian compulsory licensing regime, still remains a
controversial provision.

The level of technological sophistication in India had been quite negligible in the past,
particularly in comparison to advanced economies such as the US and Japan. However, of
late, the technological competence has been improving by leaps and bounds. In the area of
pharmaceuticals, the over 20,000 crore industry has become one of the world leaders in
generics. In the years to come, India is likely to provide a fertile ground for the emergence of
sophisticated compulsory licensing jurisprudence, at least with respect to pharmaceutical
inventions. In fact, one may argue that today, India should be characterized more
appropriately as a ‘technologically proficient developing country’, as opposed to a mere
developing country. A reasonably good indicator of this is the fact that as opposed to the
years 1992-93, when the number of foreign patent applications was greater than the number
of indigenous patent applications, the year 2001-2002 saw a near reversal in favour of Indian
patent applicants. Consequently, India may have more of a technological base today to make
compulsory licensing and local working mandates more feasible.

However, despite India’s technological progress, concerns of public interest still remain
paramount. India still has a number of public health related concerns that need to be
addressed. The main concern is that unqualified patent protection for pharmaceuticals will
result in substantially higher prices for medicines with adverse consequences for the health

16
Compulsory Licensing in India, http://www.selvamandselvam.in/compulsory-licensing-in-india/
and well-being of citizens17. Therefore, it is only a strong compulsory licensing regime that
would ensure that patents on pharmaceuticals are not misused by patentees, and that public
health concerns are adequately addressed. The recent Anthrax crisis and the willingness of
the US to subject Bayer’s patent to national expropriation laws indicates the sensitivity of
nations to diseases and the need for patent rights to yield in times of such crises.

“A mere 60 cases of one infectious disease moved these patent pillar nations to compromise
business interests for public health. Developing countries house a sizable percentage of
population with various diseases. Expecting developing countries to place business interests
of developed nations ahead of the local public health issues is impractical.”18

While only one compulsory license has been issued by the Patent Office till date, certain
sections of the international business community have felt that even this instance was not in
compliance with international standards and regulations for the protection of intellectual
property. India in particular is presented with a unique challenge, as owing to the vast
disparity in the economic conditions of its citizens, it becomes invariably hard for the
government to strike a balance between ensuring strict compliance with international
standards for patent protection, and adequately safeguarding public health and well-being. It
remains to be seen what implications the patent waiver for Dasatinib would hold, as and
when it happens19.

17
Dhara Doshi , Compulsory License Regime of Intellectual Property Rights With Reference to TRIPS,
http://www.manupatrafast.com/
18
Srividhya Ragavan, ‘Can’t We All Get Along?- The Case For A Workable Patent Model’, Arizona State Law
Journal, vol 35, 2003, p117
19
Compulsory Licensing in India, http://www.selvamandselvam.in/compulsory-licensing-in-india