In our previous article, we gave you a brief analysis of the current situation going on and its effect on the IP holders. Outlining the dilemma of the IP holders and giving possible solutions to the issue. Here, in this part, we will deal with the exclusive license grant and compulsory license phenomena. We shall also check if the current pandemic situation qualifies for a compulsory license or not. At the end of the article, we shall try to jot down possible steps one can take to overcome the pandemic situation at an employment or individual level. Having said all these, let’s jump right into our first question- Compulsory License and its implications without any further delay.


What is a Compulsory License?

Talking about Compulsory License, it is one of the legal mechanisms wherein there is clear intervention by the Central and State authorities to maintain a balance between the patent holders and third party who require the use of the invention to overcome the effects of the situation currently prevailing. By this method, the authorities try to attain equilibrium of giving the patent holders the compensation or royalty for their brilliant invention and making the invention available to a third party so that it can be used in difficult times, just like the current pandemic.

In short, Compulsory licenses is allowing or authorizing a third party to make, use or sell a patented invention without the patent owner’s consent.


What does the Statute say?

Statutorily speaking, Section 84 and Section 92 of the Indian Patent Act, 1970 lays down the criteria to be fulfilled to invoke the concept of compulsory license. Let us have a glance at the provisions to understand the concept:

Section 84: 

To get a compulsory license over a patented invention- the person interested in obtaining the license has to write an application to the Indian Patent Office stating the desire to obtain the license. Section 84 answers the basics question of compulsory license, and those are:

      1. When can you apply for a compulsory license? 

After 3 (Three) years of patent grant, any interested person can apply for a compulsory license.

      2. When can you apply for a Compulsory License?

When the given circumstances take place, a third party can apply for a compulsory license: If the given patent grant for the invention Does not satisfy the reasonable requirements of the public;  Is not available to the public at a reasonably affordable price, and Is not worked in the territory of India.

This section lays down the grounds under which one can apply for a compulsory license. However, there is an option to allow suo motto grant of the license by the government. This power is conferred upon the government via section 92. According to Section 92, under exceptional circumstances or national emergencies, the Government can, on its own motion issue the compulsory license to use the patent.


Covid-19 and Compulsory License:

Taking that into consideration, in the current situation, the outbreak of covid-19 calls for a discussion whether suo moto actions can be taken by the Government or not. In the light of the situation, COVID – 19 can possibly be considered as a national emergency and may qualify for the grant of a compulsory license under section 92 of the Indian Patents Act, 1970. In such a situation, the patentee shall be paid a reasonable royalty rate as fixed by the Controller of Patents.

Another important point to be mentioned here is that Government has the power to acquire and break the monopoly of the patent holder by authorizing certain companies to use the patent for the public ‘for the purpose of the government’ according to Section 100 of the Act for which government can pay the patent holder a considerable amount as royalty.

The Government is also conferred with an exceptional power granted by Section 102, by which it can acquire the rights to critical medical products and services to fight the virus in the public interest.


Can the current pandemic situation qualify for a compulsory license?

Let us go back to the Foundation of IPR to understand the given question. While interpreting the TRIPS Agreement, we can identify that the Agreement provides governments with reasonable relaxations in managing patents for pharmaceuticals. The Doha Declaration on the TRIPS Agreement and Public Health clarifies the right to grant compulsory licenses. Specifically, issuing a compulsory license for a pharmaceutical treatment allows a government to locally manufacture or import generic versions of the treatment without the patent holder’s consent.

Clause 5 of the Doha Declaration reaffirmed that in situations of “national emergencies” and “other circumstances of extreme urgency,” governments can issue compulsory licenses without normal requirements, such as negotiating with the patent holder. A glance of Clause 5(c) further clarifies that: “public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics,” can constitute “a national emergency or other circumstances of extreme urgency.” Thus, clearly allowing the current covid-19 situation to fall under the category of public health crisis within the meaning of clause 5(c) that justifies the use of compulsory licenses.

Yes, rewards of patent protection are necessary to support continual innovation; yet, the compulsory licensing exception exists for public health emergencies such as the current COVID-19 crisis.


Is it morally right to earn from the given opportunity?

This is one of the most debatable questions revolving around the globe. The entire world is having a negative view against these pharma companies but is the pharma ethically wrong? Understanding the true nature of the work of the companies, it can be inferred that Pharma companies have two ethical obligations- one is to produce medicines to cure the diseases, and the second is to make sure people have access to it. Being health care providers, do they really have any other obligation? If yes, what about the government and other organizations? Do they not have higher obligations to find viable solutions? Blaming the pharma companies is easy, but putting yourself in their shoes and understanding the amount of effort and hard work they have put in, and not realizing the funds they have invested can definitely cost them a fortune.

On the other hand, the pharma companies are under an obligation to produce drugs as they have industrial expertise in that area. To produce lifesaver drugs, take the whole process seriously and make sure the produced drugs are accessible to these pharma companies. It is one of the essential roles played by pharmaceutical companies. They are morally responsible to society. The issue identified while discharging this responsibility is directly connected with IP Rights, Royalty, and Government Regulations. The critics of the pharma industry claim that the right to health, right to health care, and the right to access take precedence over patents.


Right to Health Care – A Fundamental Right?

Article 21 does not explicitly mention the Right to Health care as a fundamental right, but many judicial precedents have made it clear that the Right to health is part and parcel of the right to life, thus bringing it under the ambit of Article 21.

The Supreme Court in Bandhua Mukti Morcha v. UOI & Ors. reaffirmed that the right to health is fundamental to the right to life under Article 21.

Further, In the State of Punjab & Ors. v. Mohinder Singh Chawla, Supreme Court held that the government was under the Constitutional obligation to provide health services.

Owing to the current pandemic, the judiciary has played a key role in passing many suo moto judgments wherein it was held that:

  1. The state’s inaction to provide health to citizens is a violation of Article 21.
  2. Not giving a second dose of vaccine is violative of Article 21
  3. Not providing beds and oxen facilities is again violative of Article 21.

At this juncture, it is important to distinguish between the right to health and the right to health care for which reference of Article 25 of the Universal Declaration of Human Rights (UDHR) is to be taken:

Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age, or other lack of livelihood in circumstances beyond his control”.

The right to health is one of the essential elements of the right to life. Though the State cannot give anyone health, it has to ensure that prevailing conditions are good enough for people to maintain their health. Thus, to conclude Right to Health is both a Fundamental and Human Right.


Present Challenge and Effects of Compulsory License:

Loss of Public confidence and trust in pharma companies is one of the major challenges to be addressed. The mindset of people makes it clear that the pharmaceutical industry is profit-driven machinery that employs patent monopolies to ensure that no other company can make or sell their drug for a certain number of years.

The wider populace has lost trust in the pharmaceutical industry. Implementing such a Code by the industry will be a positive first step toward rebuilding public trust and confidence.


Effects of Compulsory License

  1. The Companies will prefer getting the compulsory license to a generic drug rather than funding the Research & Development separately. Research-based pharmaceutical companies will not launch patent modules in developing countries as there is always the risk of losing the patent and funds in research.
  2. Compulsory licensing will increase the number of companies producing generic medicines. Hence the supply will go up, and the cost will come down. This will promote differential pricing of their patent module so that they can stand on the market.
  3. Patients will get medicines at a significantly cheaper rate. Also, the big pharmaceutical companies often introduce plans like free access to medicine to protect their patents in developing countries.


The Bottom Line:

Governments may guarantee a certain amount of profit for companies producing such drugs; governments may grant them insurance for a longer period of time so that they can earn back their significant investments and earn a profit while ensuring that those in need have access to such drugs during that time; governments may be the primary buyers and distributors of those drugs.

One middle-ground that would be agreeable to both sides can be adopting a Code that would regulate ethical practices in the pharma industry and strive to eliminate and prevent abuse. A Code so developed must be agreed upon by the pharmaceutical industry and not imposed on it. Such a Code shall also not be self-serving to be efficient, and the same should be widely publicized to enable accountability on the part of the pharma industry.

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