India’s Incredible Approach to Compulsory Licensing

In March 2012, the Indian Patent Office made waves in the seas of international patent law, by slashing the domestic prices of the cancer-treatment drug Nexavar, and by issuing the country’s first ever compulsory license to a local company to produce a generic version of the drug for the Indian market. The move has been hailed by other nations of the emerging world who face the same issues of access to medicines, but has developed nations threatening legal action against India.

A compulsory license is a mechanism that is outlined in the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, which basically allows countries with TRIPs-compliant patent systems to issue licenses for a patented drug or pharmaceutical to a third-party producer, without the consent of the patent holder. Obviously, the provision is controversial, because it is normally a direct infringement of a patentee’s exclusive monopoly, and has been said to undermine the purpose of the patent system itself. India’s argument, on the other hand, centres around the humanitarian decision to bring medicines to the poor, and to improve access to them in general. It’s also an attempt to prevent the prices of drugs to be driven up by patenting, which is precisely what the problem was with Nexavar. In contrast Natco Pharma, the new generic drug producer, will be offering the drug for a fraction of the price.

Bayer has promised to use every available legal enforcement mechanism available to fight India’s patent infringement. Also, the US House of Representatives and the US Patent and Trademark Office (USPTO) have both threatened to take India to the WTO for its actions. Interestingly, the issue has been characterized as one of trade, with the compulsory license being issued to benefit India’s domestic drug industry. Further, the US relied on a common misconception of the provision, which is that countries are only allowed to issue the license when there is a national emergency. In reality, the WTO clearly states that no such requirement is necessary to issue a compulsory license, and that countries can decide what the appropriate situation to do so will be. Also, the patent holder still has to be paid, so Bayer will still be making money off the generic drug as well, but not as much as it would have if it had an exclusive license.

All in all, the correctness of India’s actions depends on which side of the issue you’re on; if the move is brazen, it seems to have been accepted by other emerging countries quite well. Already, China, the Philippines, Argentina and Thailand have either adopted, or are to looking to implement the Indian Patent Act’s s. 3(D) clause. This “prevents patent[s] on incremental innovations of known compounds unless they provide enhanced therapeutic efficacy.” Coupled with the compulsory licensing provisions, it looks like emerging economies have a new tool to push for greater fairness in the international patent regime.


About: Mekhala Chaubal

Mekhala is a graduate of Osgoode Hall Law School, Canada with an interest in all areas of intellectual property (IP) law in a transnational context, privacy rights, and the development of IP in emerging economies. She is currently immersed in learning about innovation, entrepreneurship and the finer points of patent, copyright and trade-mark law as IP Legal Assistant.

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One thought on “India’s Incredible Approach to Compulsory Licensing”

  1. Mekhala Chaubal says:

    Sure enough, Bayer has gone ahead and sued Cipla, the Indian maker of the Nexavar drug in the High Court of New Delhi. Here’s a succinct and well-written legal summary of the case with its main issues and arguments:

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