What is Compulsory License?

By : Neha Dhyani

Updated : Jun 2, 2022, 9:35

A Compulsory License is an authorization given to a third party issued by the government to make use or sell a particular product or use a particular process that has been patented, where the government doesn't need the patent owner's permission.

As per Indian Patent Act, 1970 and the TRIPS agreement, this compulsory licensing concept is recognized at both National and International levels. The grant of compulsory licensing in circumstances of national emergency or extreme urgency is enabled by Section 92 of the Indian Patent Act.

Compulsory License - Overview

In 2012 India used this compulsory licensing for once, related to Nexavar, an anticancer drug. India has granted Natco Pharma Ltd to produce the same drug based on compulsory licensing. One can give an application for this any time after three years from the seal date of the patent. Countries like the USA and Europe are not favouring this compulsory licensing as they believe that it would disrupt innovation by the pharmaceutical companies.

During the time of Covid-19, a suggestion was given by the CPI (Marxist) party that Compulsory Licenses shall be issued by the government for manufacturing of a generic version of Remdesivir to treat Covid-19 since drug manufacturers of Remdesivir were using their patent monopoly and were charging a price 100times of its original costs. This Compulsory License will allow other manufacturers to produce a more affordable generic version of any patented drug.

Some industries fall under compulsory licensing in India, like drugs and pharmaceuticals, industrial explosives, electronic aerospace and defence, cigars and cigarettes of tobacco and hazardous chemicals, etc.

What is the TRIPS agreement?

The full form of TRIPS is Trade-Related Intellectual Property Rights, a comprehensive multilateral agreement on the intellectual property made between all the members of WTO.

Types of Compulsory License under Patent Act

  1. The third-party initiated CL
  2. Special CL
  3. CL of related patents
  4. CL for export of pharmaceuticals

Compulsory Licenses by the Controller of Patents

In the case of -

  1. National emergency
  2. Extremely urgent situation
  3. Public non-commercial use

Controller of patents can issue Compulsory License suo moto and issue notification by the government.

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Application for compulsory licensing

  • Public reasonable requirements have not been satisfied
  • Patented invention was not available to the public at a reasonably affordable price
  • Patented inventions of drugs are not carried out in India

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Conditions for compulsory licensing as per the TRIPS Agreement

  1. A person or company applying for a license must have tried to negotiate a voluntary license within a reasonable period and on reasonable commercial terms with the patent holder.
  2. Patent owners themselves can give a license to the third party to produce, which is known as voluntary licensing. If it fails, then even when a Compulsory License has been issued, the patent owner has to receive adequate remuneration considering the economic value of the authorization.
  3. The scope and limitations of the license must be limited to the purpose for which it was granted, and the purpose cannot be exploited. The period should be specified properly.

Only when there is a national emergency or extremely urgent circumstances can the first step of voluntary licensing negotiation be bypassed. Suppose countries unable to manufacture pharmaceuticals should be able to obtain cheaper copies produced elsewhere if necessary under Compulsory Licenses.

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FAQs on Compulsory License

Q1. What are the types of Compulsory Licenses under the Patent Act?

Ans. Different types of Compulsory Licenses under the Patent Act are -

  • The third-party initiated CL
  • Special CL
  • CL of related patents
  • CL for export of pharmaceuticals

Q2. What are the three circumstances where the patent controller can issue a Compulsory License suo moto?

Ans- The controller of the patent can issue a Compulsory License suo moto in the following circumstances -

  • National emergency
  • Extreme urgency
  • Public non-commercial use

Q3. How many times India has used this Compulsory License?

Ans- India has used this Compulsory License only once.

Q4. For which drug this Compulsory License was in the news during the Covid-19 pandemic In India?

Ans- For the Remdesivir drug, this Compulsory License was in the news during the Covid-19 pandemic In India.