Voluntary Licensing of Patents in India – An analysis

Introduction
Intellectual Property Rights are exercised through various forms – patents, trademarks, copyright
etc. They need to be registered/licensed in order to be protected from possible infringers. The term
patent refers to exclusive rights given to an inventor/assignee over an invention/creation created
by them for a limited period of time in exchange of the said invention be disclosed to the public.
The problem with patents in India was that owners of patents used the said creation to gain
excesses monetarily and thus restricting access to the general public. A classic example of this is the
pharmaceutical industry where medicines were not easily accessible to the general public due to its
exorbitant prices in the market. One thing we need to understand is that patents are granted to
encourage inventions in the society and our Indian Patents Act ensures that no patentee (who has
got patent on the invention) could create a monopoly in the Indian market which can go against our
competition laws.
The agreement on Trade-Related Aspect of Intellectual Property Rights (TRIPS) concluded
the relation between Patents on medicines and their prices. This agreement enforces the member
countries to grant patents to Pharmaceutical companies on their product and provides certain
flexibility to safeguard the public health. India faced a lot of issues after the implementation of the
patent on medicines in India as it was expensive for the people suffering from diseases like Cancer,
HIV and the medicine was not reaching to the patients to the extent as it should have been. But our
Indian patent laws provide a remedy to the issue in the form of licenses to the generic
manufacturers.

Access to Voluntary License

Indian Patent laws provide a remedy in the form of Voluntary and Compulsory license. Voluntary
license(VL) has emerged from the issue of high prices on patented medicines. Voluntary license(VL)
help the license holder to make, produce and market the generic drug and provide that to patients
at affordable prices through the process of Reverse Engineering. There is no legal provision given
under Patent Act as this license access is done through mutual contractual agreement.
Voluntary Licensing
Voluntary licensing is the arrangement between the parties where the patent holder and the third
party from any of the country come to an agreement of making affordable medicines in their
respective countries and sometimes with discounts. A patent holder may give license to the third
party either with an exclusive or non-exclusive right, the right to manufacture, import and distribute
a pharmaceutical product and much more. The licensee of the patent will act as an agent of the
company. The terms in a voluntary license, they may set price ranges or could include other terms
like the holder royalty from the distribution of the sales. Voluntary licensing arrangements, at the
discretion of the holder, are usually made for strategic reasons rather than as price gestures and
they may not entail any price reduction at all.

Implementation of Voluntary License over Compulsory License

The agreement between the countries during TRIPS (Trade-Related Aspects of Intellectual Property
Rights) discussion evolved with the patenting of Pharma Products which lead to many issues in India
due to a high cost of patented medicines. The Indian patent Act got amended in 2005 and the
procedure of Compulsory license was introduced under Section 84 of Indian Patent Act which
provides three conditions and on breach of any of those conditions, the government will issue the
compulsory license to the applicant without the permission of the Third Party who is a holder of
Patent.
1. That the reasonable requirements of the public with the respect of the invention have not
been satisfied.
2. That the patented product is not available at the reasonably affordable price.
3. That the patented invention is not worked in the territory of India.
The TRIPS allowed the Compulsory License but it is very difficult in the whole world to implement
that due to the involvement of the litigation proceedings. The application for the Compulsory
License requires the minimum waiting period of three years of time and after that, the applicant can
file for Compulsory License to the Controller General and the decision will depend upon his
discretion. This gap of three years can affect patient lives in a severe manner due to either high
prices of medicines or due to the shortage of medicines. The very existence of statutory provisions
on compulsory licenses may, in fact, be adequate to encourage voluntary licenses. The voluntary
licenses are based on the mutual contractual agreement between the patent holder and the third
party who is a generic manufacturer. Voluntary License is more favourable as they can save
litigation time and cost of both the companies and could save many patient lives.

Gilead case of offering Voluntary License

Gilead Pharma is a US pharmaceutical company which manufactures medicines for different
diseases and health issues. Gilead already had a patent on the medicine which helps to cure
Hepatitis C. In 2011, The Company offered Voluntary Licenses to the local generic manufacturers of
Indian, Malaysia and many more countries as they have the distribution in many countries. Malaysia
didn’t accept the offer and waited for one more year to have the compulsory license from the
government over the same drug but the Indian generic manufacturers accepted the offer. The
Gilead issued VL’s to 11 Generic Companies and one of the company was Natco Pharma Ltd.  Which
had opposed Gilead Patent but withdrew the opposition as soon company gave Natco the
Voluntary License. In 2014, The Gilead filed for the patent on the medicine which was the modified
drug of the last patented drug only. The Indian patent office rejected Gilead application on the
same day. The rejection was based on sec 3(d) of the patent Act which states that no patent could
be registered if it is an improved version of the previous patent. Later on, the Gilead went on to file
an appeal in Delhi High court which instructed the patent office to reconsider the rejection of
patent and after considering that again, the patent office granted the patent to the company drug
which resulted in Indian generic manufacturers to stop the production of generic medicines.  There
could be some loophole in the decision as the application was rejected because of not having
novelty in the new product but after the instructions of the patent office, authorities found novelty
in the same product. It is little bizarre but we could just wait for the expiration of three years for
obtaining a compulsory license for the manufacturing of Gilead generic medicine.

Pros of Voluntary License

1) It could speed up the access to products. As all generic companies in developing countries are
now operating under product patent regimes. This would directly help the patient as they will get
the medicine according to the need and the Drug consumer need not have to wait for the pre-grant
opposition.
2) This could help the patent holding company to get their product promoted and could reach the
invented product to each corner of the world. This helps the holder to accelerate the marketing of
the company’s name free of cost and that too with the royalty on total sales of the company.
3) It can speed up the manufacturing with the help of generic manufacturers as the Patent holder
being the single holder of the patent could not manufacture with regards to the demand of the
whole world.
4) It could also help to improve manufacturing in a more better and affordable way which would
eventually lower down the prices for the drug consumer.
5) It would increase competition (if the VL is not exclusive) in the market and curb monopolistic
trade practices in Pharma industry as one license could be issued to many generic companies.

Cons of Voluntary License

1) Offering VL to the generic manufacturers could deteriorate the due grant of patent process as
the generic manufacturers won’t oppose to the patent application.
2) The generic companies also require enough technology to manufacture the generic medicines
and most of the generic manufacturers lack in the technology and only some of them able to go
forward with the release of the generic product but it doesn’t create much difference with the
prices.
3) Licensor has all the authority to put any restriction during the agreement of the VL such as
Geographical Indications that is where to supply the medicines and where not to and many other
restrictions to which the licensee is bound.
4) Licensor royalty rate is 5% but it eventually adds up in the product so which is generally borne by
the patient only.

Conclusion
In the light of above pros and cons, the Voluntary Licenses are preferable if we consider the areas
like Sub-Saharan Africa where there is lack of money and improper R&D. The Indian Patent Act
needs the amendment of Voluntary License provision which should include the restriction to the
power of Licensor and which should solely be made according to the need of poorer section of the
country. Voluntary Licenses should not be discussed while the process of pre-grant opposition is
going on as it deteriorates the process of grant of the patent. Voluntary Licensing could eventually
increase the GDP of the country as the import and national sales would be increased and would add
up to National Income.
 What do you understand by compulsory licensing in the context of India’s IPR legal
jurisprudence? What are the associated issues? Analyse. 

Introduction:

Compulsory licenses are authorizations given to a third-party by the Controller General

to make, use or sell a particular product or use a particular process which has been patented,
without the need of the permission of the patent owner. This concept is recognized at both
national as well as international levels, with express mention in both (Indian) Patent Act, 1970
and TRIPS Agreement. 

India’s first ever compulsory license was granted by the Patent Office on March 9, 2012,
to Natco Pharma for the generic production of Bayer Corporation’s Nexavar, a lifesaving
medicine used for treating Liver and Kidney Cancer. Bayers sold this drug at exorbitant rates,
with one month’s worth of dosage costing around Rs 2.8 Lakh. Natco Pharma offered to sell it
around for Rs 9000, making it affordable for people belonging to every stratum. 

Body

There are certain pre-requisite conditions, given under sections 84-92, which need to be
fulfilled if a compulsory license is to be granted in favour of someone.

As per Section 84, any person, regardless of whether he is the holder of the license of
that Patent, can make a request to the Controller for grant of compulsory license on expiry of
three years, when any of the following conditions is fulfilled –

 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. 

 Compulsory licenses can also be issued suo motu by the Controller under section 92,
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”.

Issues related to Compulsory License

 Creation of Gray Market – In case of compulsory licensing, where the generic company
(licensee) is given rights to manufacture and sell the patented drug to the target country only
for which the compulsory license is granted but instead, the company itself or its dealers sell
the drug to other countries also. Also when compulsory license is granted to some company
for manufacture of a certain drug then some other generic companies also start making same
drug without any license.
 Difference in standards of National Emergency – no fixed standardized definition of
national health emergency is available. Having a fixed, narrow and rigid definition of national
emergency which is applicable to all the countries is a twisted task because every country has
their own health problems, different diseases, lifestyle and population.
 Apprehensions of the Patent holder – Applicant of compulsory license who has not
spent a single penny on the invention cannot be equated with the inventor. Certain patent
holders are of the view that compulsory license will dishearten the inventors and will
discourage further innovative activities.
 Royalty Free Practice or Low Royalty – it is expected that royalty free grant of
compulsory license gives chance to local or small industries to develop and utilize patented
invention. This enhances their manufacturing skills and efficiency which is helpful for their
future development and that of nation and society as well. But still patentee must be given
some royalty as per the agreement.

Conclusion

The main aim of compulsory license is to improve access of public to patented expensive
medicines. This also increases the competition in market and cuts down the price of patented
drugs, because dominance of a drug in market may lead to high price and hence abuse of
patent may result. Moreover TRIPS and Doha Declaration considered compulsory license as an
important provision so as to provide health benefits to the people without any discrimination
on the basis of color, caste, creed or even country.