Compulsory Licensing of Patents in India: How It Works and How Rarely It Happens

Indian patent law lets the Controller license a patent to a third party against the patentee’s will, if the patentee is not doing what the patent was granted for — making the invention available in India, at a price the public can afford. The provisions are wide on paper. In practice one such licence has been granted in the history of the Act, in 2012, and two applications since have been refused.

This guide explains how the mechanism works, what an applicant has to show, and why the record is what it is.

Quick reference

The three grounds

Three years after a patent is granted, any person interested may apply on the basis that:

1. the reasonable requirements of the public with respect to the invention have not been satisfied;
2. the invention is not available to the public at a reasonably affordable price; or
3. the invention is not worked in the territory of India.

Any one of them is enough. All three were found against Bayer in the only licence ever granted.

The voluntary-licence condition

An applicant cannot go straight to the Controller. It must first have tried to obtain a licence from the patentee on reasonable terms, and been refused or ignored, for a period the Act says should not ordinarily exceed six months.

This is the ground on which the second-ever application failed. BDR Pharmaceuticals wrote to Bristol-Myers Squibb once, received a reply asking questions, did not answer them, and applied. The Controller held that a single letter followed by silence was not an effort to obtain a voluntary licence, and refused to consider the merits at all.

The condition is not a formality. It requires a genuine negotiation, on the record, with terms that a patentee could reasonably have accepted.

What the Controller weighs

If the application clears that threshold, the Controller considers whether a ground is made out, and in doing so must take into account the nature of the invention, the time that has elapsed since grant and what the patentee has done in it, the applicant’s ability to work the invention to the public’s advantage, and the applicant’s capacity to bear the risk of the capital involved.

The third application — Lee Pharma’s, over AstraZeneca’s diabetes drug — failed on the merits. The Controller held that Lee had not shown what the public’s requirement for the drug actually was, that its price was in line with comparable drugs in the same class so could not be called unaffordable on its own, and that working in India does not require manufacturing in India. Each finding turned on evidence Lee had not produced.

The terms of a licence

A compulsory licence is not a transfer. If granted, it is non-exclusive — the patentee can carry on and license others — and non-assignable. The licensee must pay the patentee a royalty the Controller sets, must work the invention in India, and may supply predominantly the Indian market. The Controller can attach further conditions; in the Natco licence these included supplying the drug free to a set number of patients each year.

The licence can be terminated on the patentee’s application if the circumstances that justified it no longer exist.

The one that was granted

In March 2012 the Controller licensed Natco Pharma to make and sell sorafenib, Bayer’s kidney and liver cancer drug sold as Nexavar, at a price around three per cent of Bayer’s, with a royalty to Bayer that was later increased on appeal. Bayer had been importing small quantities at a price of several lakh rupees a month; the Controller found the public’s requirements unmet, the price unaffordable, and the invention not worked in India. The decision was upheld on appeal and the Supreme Court declined to interfere.

Nothing has followed it. The two later applications were refused for the reasons above, and no application has been granted since.

The government’s own powers

Separately from applications by private parties, the Central Government can act directly.

In a national emergency, in circumstances of extreme urgency, or for public non-commercial use, the government can notify that compulsory licences may be granted for a patent, and the Controller then grants them on application without the three-year wait or the voluntary-licence condition. The provision was much discussed during the pandemic and not used.

For export of medicines to a country that lacks the capacity to make them, the Controller can grant a compulsory licence to manufacture and export a patented pharmaceutical product, where that country has permitted the import. This is India’s implementation of the flexibility agreed internationally for that purpose.

There is also a route where one patent cannot be worked without infringing another; the holder of the later patent can seek a licence of the earlier.

Revocation after a licence

If, two years after a compulsory licence is granted, the invention is still not worked in India, or the public’s requirements are still unmet, or the price is still unaffordable, the government or any person interested can apply to have the patent itself revoked. The Controller must decide within a year.

Why the record matters

For a patentee, the practical lesson is that compulsory licensing is a real power with a high threshold, and the threshold is evidence. A patentee who imports, prices reasonably in relation to comparable products, and files accurate statements of working is well placed. A patentee who neither works the invention nor prices it accessibly, and lets the working statements lapse, is building the other side’s case.

For an applicant, the lesson from all three decisions is the same: the negotiation must be genuine and documented, and the application must prove — with numbers — what the public needs, what it can afford, and what the patentee has and has not done.

Frequently asked questions

When can a compulsory licence be applied for in India? Three years after the patent was granted, by a person interested, on the ground that the public’s reasonable requirements are unmet, the invention is not reasonably priced, or it is not worked in India. The applicant must first have tried for a reasonable period to obtain a voluntary licence.

How many compulsory licences has India granted? One — to Natco Pharma in 2012 for Bayer’s cancer drug sorafenib. Two later applications, in 2013 and 2016, were refused.

Does “worked in India” mean manufactured in India? Not necessarily. In refusing the 2016 application the Controller held that manufacturing in India is not a precondition for working; supply to the Indian market by import can amount to working, depending on the facts.

What does a compulsory licensee have to pay? A royalty set by the Controller. The licence is non-exclusive and non-assignable, must be worked in India, and is for the Indian market predominantly. Further conditions can be attached.

Can the government issue compulsory licences directly? It can notify that licences may be granted in a national emergency, extreme urgency or for public non-commercial use, and the Controller can license manufacture for export of medicines to countries lacking capacity to make them.

Can a patent be revoked for non-working? Not directly — but two years after a compulsory licence has been granted, if the invention is still not worked or made available, the government or a person interested can apply to revoke the patent.

Useful official resources

• IP India — patents — Form 17 and the Act

See our related notes on the statement of working every patentee must file, revoking a patent and our earlier note on compulsory licensing.

Considering an application, or holding a patent that a competitor says is not being worked? Talk to us.