India: The Conundrum Of Compulsory Licensing

The compulsory licensing provision has been in force ever since the inception of Patent Laws in our country. Prior to the implementation of TRIPS provisions in the Indian Patent Law, the Controllers were comparatively liberal in granting compulsory licenses (hereinafter, CL) and India witnessed a fair number of CL's being granted for public greater good if the applicant could satisfactorily prove the need for a CL. Although, the Controllers favour public greater good even today, their decisions are influenced by additional restrictive factors as compared to the times when we were not TRIPS compliant. The case of Bayer v. Natco^[1] is a live example, where India faced a lot of criticism from the western world to grant its first CL to an Indian generic. Consequently, the United States Trade Representative Offices 2014 Special Report released on April 30, 2014 placed India on the priority watch list highlighting continuing concerns over India's inadequate protection of foreign Intellectual Property Rights. So it becomes obvious that in the advent of globalization, there are economic, trade and commercial aspects involved as much as the concern for public good when it comes to such laws which affect global interests.

Since, the onus of satisfying the grounds for making an application for a CL lies with the applicant, the question before us is what an applicant needs to do to make a successful case for grant of a CL, as in the recent cases of BDR Pharmaceuticals v. Bristol Myers Squibb^[2] (hereinafter, BDR case) and Lee Pharma v. Astrazeneca AB^[3] (hereinafter, Lee Pharma case), even a prima facie case could not be made out by the applicants.

Firstly, the applicant can apply for a CL only after three years of the grant of the patent. Secondly, while making such an application, the applicant needs to establish that he is a person interested; has ability to work the invention to the public advantage and has capacity to undertake the risk in providing capital and working the invention if the application was granted. In the BDR case, the applicant proved that he was a person interested as he was into the field of pharmaceutical and had has his own manufacturing and marketing infrastructure. Therefore, he had the capacity to undertake risk in providing capital to manufacture and make Dasatinib (BMS's patented drug) accessible in India. In the Lee pharma case, the applicant stated that he was involved for more than 17 years into the pharmaceutical industry and has a production capability of 10,00,000 tablets of Saxagliptin (Astrazeneca's patented drug) and saxagliptin+metformin XR per day. Therefore, in both the cases, the Controller was satisfied that the applicants were person interested and had capacity to work the invention if the application was granted.

The next critical requirement is that an applicant must have made unqualified efforts to procure a voluntary license (hereinafter VL) from the patentee on reasonable terms and conditions, over a reasonable period of time. In the BDR case, the applicant did not respond to the queries raised by the patentee after making a request for a VL and straight away filed an application for a CL after an year of receipt of Patentee's reply. His application was rejected for lack of efforts in obtaining a VL as an absolute duty is vested upon the applicant to pursue persistent efforts in order to procure a VL for at least six month (the reasonable period stipulated by the act). But in the BDR case, the applicants refrained from any further dialogue on the assumption that it was the patentee's strategy to keep the request for a VL in abeyance by raising multiple queries and seeking information. Had the applicant responded to the patented communication and tried to convince him to agree to mutually agreeable terms, his efforts would have qualified to be reasonable to make the application for a CL. The controller did not further examine the case on merits for failure of the applicant to make efforts to procure a VL. On the contrary, in the Lee Pharma case, the applicant could establish that they made reasonable efforts to obtain a VL in light of their replies to the queries raised by the patentee and a continuous follow up process. Therefore, this case was further examined on merits.

Next, an application for CL is tested for conditions under Section 84(1) of the Patents Act i.e. (a) whether the reasonable requirements of the public have been met; (b) the availability of the patent at an affordable price; and (c) whether the patent has been worked in India or not.

The Lee Pharma case did not meet the requirements of Section 84(1), for the following reasons:

a) The applicant could not demonstrate whether the reasonable requirements of the public were met or not as they could not statistically ascertain the requirements of Saxagliptin in India. Mere assumption of tentative requirement of the drug was considered insufficient and an applicant ought to statistically define the amount of the medication actually prescribed by doctors, the demand of the medicine in the country vis-à-vis the supply etc.

b) The applicant failed to establish that the patented drug was available at an unaffordable price as other substitute drugs were available/being purchased in the same price range in India. Further, even though the applicants submitted revised reasonable selling prices, they failed to provide data w.r.t how many poor patients in India could not access the drug because of the cost issue. Therefore, it is important for the applicant to provide concrete data on the price of drug, price of the available substitute drugs, and probably compare the two vis-à-vis his quoted price to conclude whether the price of the patentee is affordable or not.

c) Since, the applicants failed to show the exact quantitative requirement of saxagliptin in India, it could not be concluded whether manufacturing of the drug in India was necessary or not. It is apparent after the decision of Bayer v. Natco that manufacturing outside India wasn't critical to working of the invention unless the patentee had an unused manufacturing plant in the country itself. Therefore, the applicant ought to demonstrate working of the patent vis-à-vis its demand or supply shortage instead of making a ruckus of the manufacturing or import practices of the patentee.

In light of the above, as the onus to make a case for grant of a CL lied with the applicant, he must ensure that he meets the requirements under the law with strong and relevant evidences and not base his arguments on mere surmises as such application are scrutinized with a broader perspective of their effects on international trade and commerce in addition to public good.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.