In times of such health crisis where there is rise in the corona virus affected patients and subsequent increase in the deaths of people, constant efforts are being made by various pharmaceutical companies not only in India but companies outside India to invent some type of life- saving drugs that would help people cure from Corona-Virus.
In India, invention of new drugs has kept the pharmaceutical companies enthusiastic, especially when their inventions are being protected under the law (patent law) and they enjoy monopoly over the production of such drugs. This has increased the competition between various pharmaceutical companies. The only drawback of enjoying such monopoly over the production of drugs is the economic benefits that they derive from the market. This increases the price of the drugs in the market and the poor people find it very difficult to buy such drugs. Thus, this paper highlights the use of compulsory licensing of patents in the interest of public to ensure easy access of drugs to the people.
HISTORY OF THE PATENT LAW IN INDIA
The Tek Chand Patents Enquiry Committee (1948-50) and Ayyangar Committee (1959) had contributed immensely in formulating the new patent act of 1970. In the Patent Act, 1970, there was a concept of “process patent” which meant that only the process used for manufacturing of the product could be patented and not the product and the patent protection would be granted for a period of 7 years. It allowed the companies to manufacture similar product but with a condition that the process of the earlier similar product was not copied. This gave a boost to the pharmaceutical companies to invent more and more drug and apply for process patent to seek protection and enjoy monopoly over the process of the product being manufactured.
AMENDMENTS IN THE PATENT LAW AFTER THE TRIPS AGREEMENT
The TRIPS agreement is viewed as a major development in the Patent Act, 1970. India being a signatory to the TRIPS agreement had to make significant changes in the Patent Act, 1970. TRIPS agreement allowed the developing countries for delayed compliance of the agreement.[2] Significant changes made in the Patent Act after TRIPS agreement are:
- Patent (Amendment) Act, 1999[3] introduced transitional facility to receive and hold patent applications of pharmaceutical and agricultural chemical products till 1 January 2005 and for grant of Exclusive Marketing Rights for 5 years or till grant of patent.[4]
- Patent (Amendment) Act, 2002[5] defined the definition of the term ‘invention’ in accordance with the TRIPS agreement, incorporated certain exclusions as permitted by the TRIPS agreement, increased the period of patent protection from 7 to 20 years, a provision was added for the reversal of burden in case of infringement, provisions relating to compulsory licensing has been modified in view of the public interest, etc,.
- Patent Amendment Act, 2005[6] provided for patent for food, medicine, drug and chemical processes[7], the provisions for Exclusive marketing rights (EMRs) was removed, provided for the compulsory license for manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems[8] and it repealed the Ordinance on Patents Third Amendment.
WHAT CAN BE PATENTED?
Any invention as defined by sec. 2 (1) (j) of the Patent Act, 1970[9] is capable of being patented. On the contrary, section 3 of the Patent Act, 1970[10] lists down several innovations that are not inventions, such as:
- Any invention which is contrary to the well-established natural laws.
- Any invention which is intended to be used for commercial exploitation or is contrary to the public order and morality.
- Mere discovery of scientific principle.
- Mere discovery of a new form of a known substance.
- A method of agriculture of horticulture.
- Any process for the medicinal, surgical, curative, prophylactic diagnostic, therapeutic or other treatment of human beings or animals.
- Any invention which in effect is a traditional knowledge.
NEGATIVE IMPACT OF PATENT RIGHTS ON PUBLIC HEALTH
Any invention can now be patented under the Patent Act, 1970, provided it does not fall within any of the provision of section 3 that prohibits patentability of products. Thus, the pharmaceutical companies can now patent their life saving drugs after the TRIPS Agreement. Patenting the drug helps the company to derive economic benefits from the market. Once the drug is patented, the prices can well be regulated by the companies. Thus, an invention of any new drug by other company would increase the competition between the companies and the effect of the same could be reflected on the prices of the drugs. But there are still two considerable problems in deciding fair prices of the drugs in the market:
- Either the prices are so high that it makes the drug unaffordable for the people even in the rich countries, or
- Either the prices are too low that it will force the companies to leave the market.
Thus, an invention of any new drug causes the price of the drug to rise to such an extent that it becomes inaccessible by the poor people causing major health related problems. Here the government can play a very important role to ensure that people get access to the life-saving drugs. It is important to note that a new invention costs a lot to the companies. So, the government here can provide research infrastructural facilities at public cost and providing incentives to the researchers and the scientists.[11]
DOHA DECLARATION AND ITS IMPORTANCE
The DOHA Declaration which gave importance to the public health was adopted in 2001.[12] The impact of DOHA Declaration on the TRIPS Agreement was that it affirmed the interpretation and implementation of the agreement in a direction to promote public health and ensure access of medicines for all. The Declaration enshrined the principles that WTO had advocated and advanced.
Paragraph 6 of the Doha Declaration instructs the Council for TRIPS to find an expeditious solution to the problem faced by countries with insufficient or no adequate pharmaceutical production capacity in making effective use of the compulsory licensing provisions (Article 31) of the TRIPS Agreement.[13] It is relevant to note that the DOHA Declaration acknowledged the conflict that may arise between the Patent Rights and the Right to Health of the Public. DOHA declaration is important because it recognized that the Patent Rights could not be an obstacle on the right to health of the public.
COMPULSORY LICENSING AND ITS USE
Generally, the third parties are restricted from the making, using, exercising and vending of the patented products without the authorization of the Patent Holder. But the grant of compulsory licensing by a competent authority enables the third party to use the patented inventions without the consent of the patent-holder. Currently, the WTO, TRIPS and the DOHA Declaration have provisions for compulsory licensing. The amended Patent Act, 1970 also contains provisions for the grant of compulsory licensing in Chapter XVI which was introduced in 2002 (sec. 82-94).[14] Compulsory Licensing is an extra-ordinary feature of the Patent Act, 1970 because it prevents the abuse of the patent rights when the right holder tries to pre-empt the entry of the competitors using his statutory rights under the Patent Law.
Compulsory Licensing under sec. 84 of the Patent Act, 1970, can be granted at any time after 3 years of the expiration of the grant of patent on the following grounds:
- that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or
- that the patented invention is not available to the public at a reasonably affordable price, or
- that the patented invention is not worked in the territory of India.
Article 31 of the TRIPS Agreement and section 90 of the Patent Act, 1970 lays down various conditions for the granting of compulsory licenses, such that granting of licensing would be granted on case-by-case basis, the use should be non-assignable and exclusive, should be limited for the purpose for which it is authorized and the right holder should be remunerated adequately taking into account the economic value of the authorization and so on and so forth.
While compulsory licensing is an essential and effective tool to curb anti-competitive practices that may be exercised by the right holder, due diligence should be exercised while granting the same. Granting of compulsory licensing can also discourage the foreign pharmaceutical companies and this can have an adverse impact on the FDI. It should be granted in limited number of cases which were in desperate measures for the protection of public interest in large.
Instances where compulsory licensing has been granted in India in the past:
India granted its first compulsory license to Natco Pharma Ltd. to use Bayer Corporation’s patented kidney cancer drug Nexavar.[15] Bayer’s had patented the drug Nexavar in the year 2006 and also agreed to import the drugs to India in the year 2007. But the Patent Office observed that the drug was still not imported till 2008 and it was only in the year 20009 and 2010 that small quantities of drugs were imported. Since the Bayer’s were not making the drug accessible to the public, Natco Pharma Ltd. applied for compulsory licensing of the drug Nexavar to make it accessible to the public. It was in the interest of the public at large that the compulsory license was granted to Natco Pharma Ltd. upon condition that they had to pay Bayer’s royalty of 6% of the total net sales of the drug.[16]
Few instances of grant of Compulsory Licensing in foreign countries:[17]
- Thailand’s public health authorities issued two compulsory licenses on AIDS drugs and one on clopidogrel bisulfate (Plavix), a major cardiovascular treatment. (2006-2007)
- The president of Brazil, in 2007, had signed an order for a compulsory license for government use of Merck’s patent on the antiretroviral drug, efavirenz (Sustiva), in a public ceremony that was broadcast around the world.[18]
- In 2008, Indonesia threatened originator pharmaceutical companies with compulsory licensing and even expulsion unless they were willing to invest in local production of pharmaceuticals.
COMPULSORY LICENSING: BRIDGE BETWEEN PATENT LAW AND COMPETITION ACT
It is quite natural that the grant of patent, provides the right holder the exclusive rights over the use, manufacture and sale of the patented product. Exclusivity of rights to the patent holder may cause him to take undue advantage of his dominant position in the market. For instance, if a drug is patented by the pharmaceutical company, it gets exclusive rights over the use and production of that drug. The companies also stall other companies from competing and they can regulate the prices of the drugs in a manner that they derive unprecedented profits. This is nothing but an abuse of the dominant position in the market. Thus, the role of the Competition Act, 2002 is of utmost importance. This Act enables competition in the market by ensuring freedom of trade and prevents practices having adverse effect on competition thereby protecting the interests of the consumers. The appropriate authority for the grant of the compulsory license is the Competition Commission of India (CCI) under the Competition Act, 2002. Thus, a company by virtue of having exclusive rights over the product cannot take undue advantage of its dominant position in the market. Therefore, grant of compulsory license by the CCI is to prevent anti-competitive practices by the companies, who are in a dominant position, thereby bridging the gap between the innovation and the competition lead after such innovation.
CONCLUSION
“Invention is a process, you don’t get it overnight”, is what Louis Foreman said. Therefore, the efforts put behind such process need to be protected. But when, by virtue of having exclusive right over the invention, the right holder makes abuse of his dominant position, especially while dealing with certain life saving drugs, certain safeguards or restrictions in order to prevent the right holder from such anti-competitive practices, methods like compulsory licensing are used where the third party can make use of such invention in the interest of the public.
[1] Author: Hitesh Vachhani, 4th Year Law Student at GLS Law College
[2] Article 65: “Transitional Arrangements”sub-clause 2: A developing country Member is entitled to delay for a further period of four years the date of application, as defined in paragraph 1, of the provisions of this Agreement other than Articles 3, 4 and 5.
[3] w.e.f. 01-01-1995 (applied retrospectively) available at:
[4]TRIPS Agreement and Amendment of Patents Act in India by Sudip Chaudhuri available at:
https://www.researchgate.net/publication/259874024_TRIPS_Agreement_and_Amendment_of_Patents_Act_in_India ; also read: AMMENDMENTS IN PATENT ACT- 1999,2002 AND 2005- OVERVIEW AND COMPARISON by Krunal Parikh and Mr. Maheshkumar Kataria available at: https://www.pharmatutor.org/articles/ammendments-patent-act-1999-2002-2005-overview-comparison
[5] w.e.f. 20.05.2003 available at: https://dipp.gov.in/acts/patents-amendment-act-2002-25-june-2002
[6] w.e.f. 01.01.2005 available at: http://www.ipindia.nic.in/writereaddata/Portal/IPOAct/1_69_1_patent_2005.pdf
[7] this amendment was introduced by an ordinance on patents third amendment which was repealed by the patent amendment act of 2005
[8] An overview of The Patent (Amendment) Act, 2005 by Divyesh Pratap available at: http://www.lexpress.in/law-development/overview-patent-amendment-act-2005
[9] Section 2 (1) (j) “invention” means a new product or process involving an inventive step and capable of industrial application.
[10] Section 3: What are not inventions?
[11] Impact of patent on the access and price of life saving drugs available at:
https://www.pharmatutor.org/articles/impact-of-patent-on-the-access-and-price-of-life-saving-drugs
[12] Adopted by the WTO Ministerial Conference in November 2001.
[13] Implications of the DOHA declaration on the trips agreement and public health by Carlos M. Correa University of Buenos Aires June 2002
[14] For Compliance to the TRIPS Agreement, the Patent Act, 1970 was amended in three phases, first in 1999, then 2002 and finally in 2005. The provisions on compulsory licensing provide details of general principles applicable to the working of patented inventions; grounds for grant of compulsory licenses; matters to be taken into account by the Controller of patents while considering applications for compulsory licenses; the procedure for dealing with compulsory licensing applications; general purposes for granting compulsory licenses; terms and conditions of compulsory licenses.
[15] Bayer Corporation v. Natco Pharma Ltd., Order No. 45/2013 (Intellectual Property Appellate Board, Chennai), available at http: //www.ipab.tn.nic.in/045-2013.htm (Last visited on May 12, 2013)
[16] Natco Pharma Ltd. V. Bayer Corporation And The Compulsory Licensing Regime In India By: Mansi Sood, available at: https://nujslawreview.org/wp-content/uploads/2016/12/mansi.pdf ; also read India Grants First Compulsory Licence, For Bayer Cancer Drug, dated 12.03.2012 by Maricel Estavillo, available at: https://www.ip-watch.org/2012/03/12/india-grants-first-compulsory-licence-for-bayer-cancer-drug/
[17] Compulsory licensing of patented pharmaceutical inventions: evaluating the options by Jerome H. Reichman, available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2893582/#FN34
[18] J. Cohen, “Brazil, Thailand Override Big Pharma Patents,” Science, May 11, 2007, at 816;
BY: HITESH VACHHANI (Member, Pride Legals)
DECLARATION
We, (Hitesh Vachhani, Shikhar Khandelwal and Shreyansh Gaur) hereby solemnly declare that views so expressed in this blog resembles/ expresses our personal opinions/ views and are not influenced by opinions/views of any individual and sufficient references are given where required.
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