IPR
Topic 55 Compulsory Licensing
Topic 55 — Compulsory Licensing
A compulsory licence is a statutory authorisation granted by the State to a third party to use a patented invention without the patent holder's consent — the most powerful tool the State has to break a patent monopoly. The Indian Patents Act 1970 contains one of the most developed compulsory licensing regimes in the world, codified in Sections 84 to 92A. The framework was tested for the first time in 2012 in the landmark Bayer Corporation v. Natco Pharma case — India's sole compulsory licence to date — when the Patent Office granted Natco the right to manufacture the cancer drug Nexavar at 6% royalty, reducing the price from ₹2,80,428 per month to ₹8,800. This topic walks through the entire compulsory licensing framework, the Bayer-Natco landmark, the Doha Declaration mechanisms, and recent applications (rejected and pending).
1. Architecture of Sections 84-92A
Section | Subject |
|---|---|
Section 84 | Compulsory licence on grounds of public requirement, price, non-working. |
Section 85 | Revocation of patent for non-working after 2 years of compulsory licence. |
Section 86 | Power of Controller to adjourn application for compulsory licence. |
Section 87 | Procedure for dealing with applications under Sections 84 and 85. |
Section 88 | Power of Controller in granting compulsory licences. |
Section 89 | General purposes for granting compulsory licences. |
Section 90 | Terms and conditions of compulsory licences. |
Section 91 | Licensing of related patents. |
Section 92 | Compulsory licences in cases of national emergency / extreme urgency / public non-commercial use. |
Section 92A | Compulsory licence for export of pharmaceutical products (Doha implementation). |
2. Section 84 — The Three Statutory Grounds
Section 84(1) "At any time after the expiration of three years from the date of the grant of a patent, any person interested may make an application to the Controller for grant of compulsory licence on patent on any of the following grounds, namely:— (a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or (b) that the patented invention is not available to the public at a reasonably affordable price, or (c) that the patented invention is not worked in the territory of India." |
A. The Three Pillars
84(1)(a) PUBLIC NEED reasonable requirements | 84(1)(b) PRICING reasonably affordable | 84(1)(c) WORKING in territory of India |
B. The 3-Year Waiting Period
Section 84 imposes a 3-year waiting period from the date of grant. The rationale: give the patentee a reasonable initial period to establish working before facing compulsory licensing pressure. Sections 92 and 92A operate without the 3-year wait — emergencies and Doha mechanisms operate immediately.
C. "Person Interested"
The applicant must be a "person interested" — Section 2(1)(t) defines this as including:
- A person engaged or in the same business as the patented invention.
- A person who would benefit from the working of the patent.
- Generic pharmaceutical companies, public health organisations, or other commercial entities.
D. Section 84(7) — Reasonable Requirements
Section 84(7) "For the purposes of this Chapter, the reasonable requirements of the public shall be deemed not to have been satisfied— (a) if, by reason of the refusal of the patentee to grant a licence or licences on reasonable terms— (i) an existing trade or industry or the development thereof or the establishment of any new trade or industry in India or the trade or industry of any person or class of persons trading or manufacturing in India is prejudiced; or (ii) the demand for the patented article has not been met to an adequate extent or on reasonable terms; or (iii) a market for export of the patented article manufactured in India is not being supplied or developed; or (iv) the establishment or development of commercial activities in India is prejudiced..." |
3. Bayer Corporation v. Natco Pharma — The Landmark
📖 Bayer Corporation v. Natco Pharma Ltd. (Compulsory Licence Application — Patent Office, 9 March 2012) Background — Bayer's patent IN 215758 on Sorafenib Tosylate (marketed as Nexavar) for advanced kidney/liver cancer. Patent granted 3 March 2008. Bayer priced Nexavar at ₹2,80,428 per month — out of reach for most Indian patients. Bayer was importing the drug; not manufacturing in India. Application — Natco Pharma Ltd. applied for compulsory licence on 29 July 2011 (3+ years after grant). Natco offered to manufacture and sell at ₹8,800 per month. Bayer had earlier (December 2010) rejected Natco's request for voluntary licence at less than ₹10,000/month. Holding — Controller P.H. Kurian (9 March 2012) granted compulsory licence to Natco. Findings: (i) Reasonable requirements not met under Section 84(1)(a) — only 2% of patient need met. (ii) Drug not at reasonably affordable price under Section 84(1)(b) — ₹2,80,428/month was 41x the per capita income of an Indian. (iii) Patent not worked in India under Section 84(1)(c) — Bayer was only importing, not manufacturing. Terms — 6% royalty to Bayer on net sales; selling price ₹8,800/month; supply free to 600 needy patients per year; non-exclusive, non-assignable; for life of patent (until 2020). Significance — India's first and only compulsory licence to date. Globally cited; demonstrated the operational reality of compulsory licensing under Section 84. |
A. IPAB Affirmation (4 March 2013)
📖 Bayer Corp. v. Natco Pharma Ltd., 2013 (3) MIPR 110 (IPAB) Facts — Bayer appealed the Controller's order to the IPAB. Bayer argued that working could be satisfied through importation; that the price was reasonable; that Natco was not an "interested person". Holding — IPAB Chairperson Justice Prabha Sridevan (4 March 2013) affirmed the Controller's order. Key holdings: (i) "Working" under Section 84(1)(c) does not absolutely require local manufacture but in this case Bayer's importation was inadequate. (ii) ₹2,80,428/month was prima facie not "reasonably affordable" — it was beyond the means of all but the wealthiest Indians. (iii) Public requirements were not met — Bayer's sales covered only a tiny fraction of estimated demand. (iv) Royalty rate of 6% was reasonable on the UNDP 2001 royalty guidelines (4-7% for pharmaceuticals). Significance — IPAB affirmation of all three Section 84(1) grounds operating cumulatively. |
B. Bombay High Court (15 July 2014)
📖 Bayer Corporation v. Union of India, 2014 (60) PTC 277 (Bom) Facts — Bayer challenged the IPAB order through writ petition before Bombay HC. Holding — Bombay HC Division Bench (Justice M.S. Sanklecha and Justice M.S. Sonak, 15 July 2014) upheld the IPAB order. Specifically held: (i) "Working" can be established through manufacture OR import, on a case-by-case basis. (ii) Bayer's importation alone, without commercial scale, was insufficient. (iii) The 6% royalty rate was reasonable. (iv) Section 84 is constitutionally valid; not in conflict with TRIPS Article 27 read with Paris Article 5A. Significance — Sealed the Bayer-Natco compulsory licence as binding precedent. Bayer subsequently chose not to appeal to the Supreme Court. |
4. Procedure for Compulsory Licensing — Sections 87-90
A. Section 87 — Procedure
The procedural sequence:
- Applicant files Form 17 with the Controller, with prescribed fees.
- Application is published in the Official Journal.
- Patentee (and other interested parties) file opposition within 2 months.
- Hearings before the Controller — both sides present evidence and arguments.
- Controller decides within reasonable time, with detailed written order.
B. Section 88 — Powers of the Controller
Section 88 gives the Controller wide powers to:
- Determine whether grounds under Section 84 are made out.
- Fix the terms of the compulsory licence.
- Specify royalty rate and other commercial terms.
- Impose conditions to protect public interest.
- Modify or terminate the licence on application.
C. Section 89 — General Purposes
Section 89 "The powers of the Controller upon an application made under section 84 shall be exercised with a view to securing the following general purposes, that is to say,— (a) that patented inventions are worked on a commercial scale in the territory of India without undue delay and to the fullest extent that is reasonably practicable; (b) that the interests of any person for the time being working or developing an invention in the territory of India under the protection of a patent are not unfairly prejudiced." |
D. Section 90 — Terms and Conditions
Section 90 (Material Terms) "In settling the terms and conditions of a compulsory licence under section 84, the Controller shall endeavour to secure— (i) that the royalty and other remuneration, if any, reserved to the patentee or other person beneficially entitled to the patent, is reasonable, having regard to the nature of the invention, the expenditure incurred by the patentee in making the invention or in developing it and obtaining a patent and keeping it in force and other relevant factors; (ii) that the patented invention is worked to the fullest extent by the person to whom the licence is granted and with reasonable profit to him; (iii) that the patented articles are made available to the public at reasonably affordable prices; (iv) that the licence granted is a non-exclusive licence; (v) that the right of the licensee is non-assignable..." |
E. Royalty Determination
Section 90(i) directs the Controller to fix reasonable royalty. The UNDP 2001 royalty guidelines (4-7% for pharmaceuticals) are routinely applied. Bayer-Natco fixed 6% — at the high end of the UNDP range.
5. Section 92 — National Emergency / Extreme Urgency / Public Non-Commercial Use
Section 92(1) "If the Central Government is satisfied, in respect of any patent in force in circumstances of national emergency or in circumstances of extreme urgency or in case of public non-commercial use, that it is necessary that compulsory licences should be granted at any time after the sealing thereof to work the invention, it may make a declaration to that effect, by notification in the Official Gazette, and thereupon the following provisions shall have effect..." |
A. Three Grounds Under Section 92
- National emergency — wars, public health emergencies (HIV/AIDS, pandemics).
- Extreme urgency — time-sensitive public interest situations.
- Public non-commercial use — government use for public services without profit motive.
B. No 3-Year Waiting Period
Unlike Section 84, Section 92 operates immediately — no 3-year waiting period. The provision was designed for crisis response and routine government use.
C. COVID-19 and Section 92
During the COVID-19 pandemic (2020-2022), there was significant academic and policy discussion about Section 92 invocation for COVID-19 vaccines and therapies. Indian government did not formally invoke Section 92 — instead, voluntary licensing arrangements (e.g., Serum Institute manufacturing AstraZeneca's Covishield) and TRIPS Council waiver discussions were preferred. The 92 framework remained available but was not activated.
6. Section 92A — Doha Declaration Implementation
Section 92A "(1) Compulsory licence shall be available 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, provided compulsory licence has been granted by such country or such country has, by notification or otherwise, allowed importation of the patented pharmaceutical products from India. (2) The Controller shall, on receipt of an application in the prescribed manner, grant a compulsory licence solely for manufacture and export of the concerned pharmaceutical product to such country under such terms and conditions as may be specified and published by him." |
A. The Doha Declaration Background
The Doha Declaration on the TRIPS Agreement and Public Health (2001) explicitly recognised the right of WTO members to use TRIPS flexibilities — particularly compulsory licensing — to address public health crises in developing countries. The Doha Declaration also addressed the "August 30 problem" — countries with insufficient manufacturing capacity (e.g., many African states) could not effectively use compulsory licensing without external manufacturing.
B. The 30 August 2003 Decision
The WTO General Council decision of 30 August 2003 (later codified in the TRIPS Article 31bis amendment, in force 23 January 2017) established the framework: countries with manufacturing capacity (like India) can grant compulsory licences for export to countries with insufficient capacity. Section 92A implements this framework in Indian law.
C. Practical Implementation
Section 92A allows Indian generic manufacturers to:
- Manufacture patented pharmaceutical products in India.
- Export the products to qualifying countries with insufficient manufacturing capacity.
- Operate under compulsory licence terms set by the Indian Controller.
✅ Section 92A — limited practical use Despite the elegance of the framework, Section 92A has been used very rarely in practice. Reasons include: · Procedural complexity — both the importing country and India must coordinate. · Voluntary licensing alternatives — multinational pharma companies often offer voluntary licences to avoid compulsory licensing. · Emergency procurement mechanisms — international agencies (WHO, UNICEF, GAVI) typically procure through voluntary arrangements. Nonetheless, the framework remains an important policy tool — particularly for developing-country manufacturing partnerships. |
7. Recent Compulsory Licence Applications
A. BDR Pharmaceuticals v. Bristol-Myers Squibb (2013)
BDR Pharmaceuticals applied for a compulsory licence to manufacture dasatinib (BMS's Sprycel) for chronic myeloid leukemia. The Controller rejected the application on the ground that BDR had not made adequate prior efforts to obtain a voluntary licence — a procedural prerequisite under Section 84(6)(iv). The decision emphasised the importance of substantive voluntary licence negotiations before invoking compulsory licensing.
B. Lee Pharma v. AstraZeneca (2015)
Lee Pharma applied for a compulsory licence on saxagliptin (a diabetes drug). The application was rejected on the ground that Lee Pharma had not demonstrated adequate engagement with the patentee for voluntary licence first. The pattern in BDR and Lee Pharma demonstrates that the Controller scrutinises voluntary-licence efforts as a procedural prerequisite.
C. Natco v. Bayer — Round Two (Pending and other ongoing applications)
Natco has reportedly filed additional compulsory licence applications on other patented drugs over the years; results have varied. The post-Bayer-Natco landscape remains active, though the bar set by the Patent Office, IPAB, and Bombay HC in the original Bayer case has not been replicated.
8. Comparative Perspective
Country | Compulsory Licensing Track Record |
|---|---|
India | One grant (Bayer-Natco 2012); active framework with multiple pending applications. |
Brazil | Multiple grants for HIV/AIDS drugs in 2000s; emerged as model for Latin American compulsory licensing. |
Thailand | Multiple grants in 2007 for HIV/AIDS and cardiovascular drugs; significant international precedent. |
South Africa | Compulsory licensing framework available; rarely used. |
Canada | Specific compulsory licensing for export under WTO Article 31bis (Doha decision). |
EU/UK | Compulsory licensing available but rarely invoked. |
USA | No statutory compulsory licensing in private patents; government-use licensing exists (Bayh-Dole, 28 USC 1498). |
9. Practical Considerations
✅ For applicants — twelve points Document substantive voluntary licence negotiations FIRST — Section 84(6) procedural prerequisite. Use Form 17 with detailed grounds and evidence. Establish "interested person" status through commercial activity. Establish all three grounds under Section 84(1) where possible — cumulative impact strengthens application. Provide market research evidence on demand and pricing. Calibrate proposed royalty rate to UNDP guidelines (4-7% for pharma). For Section 92 emergency claims, cooperate with public health authorities. For Section 92A export claims, coordinate with importing country authorities. Maintain confidentiality of competitive information during proceedings. Plan for appellate proceedings — Bayer-Natco took 2 years from grant to Bombay HC affirmation. Coordinate with civil society organisations where public health interest aligns. For pharmaceutical applications, demonstrate technical and manufacturing capability. |
✅ For patentees defending — eight points Maintain robust working through Form 27 — pre-empt Section 84(1)(c) challenge. Establish reasonable pricing — differential pricing or patient access programs. Document voluntary licence offers — strong defence against Section 84(6) procedural ground. Maintain Indian sales records and distribution data. For high-priced drugs, consider proactive patient access programs. For pure imports, document commercial necessity for not manufacturing locally. Engage in good-faith voluntary licence negotiations when approached. Plan for Section 92 emergency situations — voluntary licence arrangements can pre-empt government action. |
🎯 EXAM POINTERS — TOPIC 55
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