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*B.K. Keayla
Introduction
Compulsory licensing system is the core component of the patents system. The system refers to the
practice by a government to authorize itself or the third parties to
use the subject matter of a patent with or without the authorization
of the patent holder for reasons of public policy incorporated in the
patents law of that government. The system helps the enterprises
other than the patent holders to play a competitive role by limiting
the exclusive rights of the patentee in the domestic markets and to
meet the export demands of other countries for the relevant patented
products. Paris Convention, TRIPS Agreement and Doha Declaration on
TRIPS and Public Health stipulate appropriate provisions on
compulsory licensing for implementation by the Member countries of the
WTO in their national patents law. There is hardly any
developing countries including India that have made full use of the
stipulations in the three documents mentioned. This Paper deals with
the various possibilities for ensuring the working of the patents
under certain contingencies through compulsory licences granted by
the concerned government authorities to meet the demands of the
patented products, particularly in the area of health care needs. India
in particular has ignored certain important flexibilities in
the amending process of its national Patents Act 1970.
The stipulations on compulsory
licensing in the three documents are explained hitherto :
Paris Convention
Paris Convention was signed in
1883. It was mainly a club of the developed countries. At that time
the term working of the patent was not defined. Each member country
was free to define the ‘working’ of the patents in their own
national patents law. The 1925 amendments of the Paris Convention
dealt with forfeiture of patent for non-working after a grace period
of three years from the date of grant of patent. The last amended
Paris Convention of 1967 in its Article 5-A dealt with the issue of
compulsory licensing in an adequate manner. Article 5-A stipulates
as follows:
“5A (2) Each country of the
Union shall have the right to take legislative measures providing for
the grant of compulsory licences to prevent the abuses which might
result from the exercise of the exclusive rights conferred by the
patent, for example, failure to work.
(4) A compulsory licence may not
be applied for on the ground of failure to work or
insufficient
working
before the expiration of a period of four years from the date of
filing of the patent application or three years from the date of the
grant of the patent, whichever period expires last; it shall be
refused if the patentee justifies his inaction by legitimate reasons.
Such a compulsory licence shall be non-exclusive and shall not be
transferable, even in the form of the grant of a sub-licence, except
with that part of the enterprise or goodwill which exploits such
licence”.
The stipulations in the Paris
Convention have become relevant even after the enforcement of TRIPS
Agreement. Article 2 of TRIPS in Para 1 provides that:
“Members shall comply with
Articles 1 through 12, and Article 19 of the Paris Convention
(1967)”.
The above stipulations in the
Paris Convention will be used in this Paper for determining
possibilities for grant of compulsory licences.
TRIPS Agreement
Article 31 of the TRIPS
Agreement deals with “Other use (of the patented subject matter)
without authorization of the right holder”. Article 31 in its
relevant subparagraphs stipulates as follows:
“Article 31: Where the law
of a Member (Country) allows for other use of the subject matter of a
patent without the authorization of the right holder, including use
by the government or third parties authorized by the government, the
following provisions shall be respected :
(a) authorization of such
use shall be considered on its individual merits ;
(b) such use may only be
permitted if, prior to such use, the proposed user has made efforts
to obtain authorization from the right holder on reasonable
commercial terms and conditions and that such efforts have not been
successful within a reasonable period of time.
This requirement
may be waived by a Member in the case of a national emergency or
other circumstances of extreme urgency or in cases of public
non-commercial use. In situations of national emergency or other
circumstances of extreme urgency, the right holder shall,
nevertheless, be notified as soon as reasonably practicable.
In the case of
public non-commercial use, where the government or contractor,
without making a patent search, knows or has demonstrable grounds to
know that a valid patent is or will be used by or for the government,
the right holder shall be informed promptly ;
(f) any such use shall be
authorized predominantly for the supply of the domestic market of
the Member authorizing such use ;
-
members are not obliged to apply the conditions set
forth in subparagraphs (b) and (f) where such use is permitted to
remedy a practice determined after judicial or administrative process
to be anti-competitive. The need to correct anti-competitive practices
may be taken into account in determining the amount of remuneration in
such cases. Competent authorities shall have the authority to refuse
termination of authorization if and when the conditions which led to
such authorization are likely to recur;
(l) where
such use is authorized
to permit the exploitation of a patent (“the second patent”)
which cannot be exploited without infringing another patent (the
first patent)”.
Article 8
of TRIPS on
‘Principles’ also stipulates that ;
“2. Appropriate
measures, provided that they are consistent with the provisions of
this (TRIPS) Agreement, may be needed to prevent the abuse of
intellectual property rights by right holders or the resort to
practices which unreasonably restrain trade or adversely affect the
international transfer of technology.”
The above
two important Articles
of TRIPS can be used to determine possibilities for grant of
compulsory licences. These Articles provide enough flexibilities
for grant of compulsory licences by the concerned government
authorities.
Doha
Declaration of WTO
on TRIPS and Public Health
The Doha
Declaration of November
2001 is a landmark Declaration clarifying the rights of the Member
countries in regard to the granting of compulsory licensing
stipulations of the TRIPS Agreement. Relevant paragraphs of this
Declaration are reproduced as follows:
“(4) We
agree that the TRIPS
Agreement does not and should not prevent Members from taking
measures to protect public health. Accordingly, while reiterating
our commitment to the TRIPS Agreement, we affirm that the Agreement can
and should be interpreted and implemented in a manner supportive
of WTO Members’ right to protect public health and, in particular,
to promote access to medicines for all.
In this
connection, we reaffirm
the right of WTO Members to use, to the full, the provisions in the
TRIPS Agreement, which provide flexibility for this purpose.
(5) Accordingly and in the
light of paragraph 4 above, while maintaining our commitments in the
TRIPS Agreement, we recognize that these flexibilities include :
(a) Each Member has the right to grant compulsory licences and the freedom to
determine the grounds upon which such licences are granted.
(b) Each Member has the right to determine what constitutes a national
emergency or other circumstances of extreme urgency, it being
understood that public health crises, including those relating to
HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a
national emergency or other circumstances of extreme urgency”.
Indian delegation to the
Ministerial Conference at Doha of November 2001 played a major role
in the framing and adoption of the Doha Declaration on TRIPS and
Public Health.
The flexibilities confirmed in
the Doha Declaration are of utmost importance and should be used by
all the developing countries including India in framing the
compulsory licence provisions in their patents law to ensure
substantive role of the domestic enterprises.
Approach in framing
compulsory licences provisions
In framing the national patents system in particular the compulsory licence
provisions, it is relevant to ensure that there is co-relation of the patents system
with the National Health Policy as the policy of each country is a
paramount document which cannot be ignored because of certain
parameters of the TRIPS Agreement on patents system. The patents
system in fact should be complementary to ensure the success of the
National Health Policy. The Doha Declaration has legal effects,
equivalent to those of an authoritative interpretation under WTO
rules.
WORKING OF PATENTS
Having quoted the relevant
stipulations in Paris Convention,TRIPS Agreement and Doha Declaration
on Public Health on scope of flexibilities and freedom available to
member countries to legislate compulsory licensing provisions in
their national patents law for ensuring availability of
pharmaceutical products at competitive prices, the working of
patents in the country which grants exclusive rights on the relevant
products is important. Working of patents through the domestic
enterprises must be ensured through the system of grant of
compulsory licences. Presently there are over 20,000
pharmaceutical manufacturers registered in India and hundreds of
enterprises are producing the same product and competing among
themselves and meeting the country’s requirements at competitive
prices. This phenomenon cannot be equated to the working of patent
through imports by the patent holder. Extensive involvement of the
domestic enterprises in the production and availability of patented
products is absolutely necessary in a vast country like India.
Compulsory Licensing System
Compulsory licensing system is
certainly the back-bone of the patents law. The question of
constraints which would emerge
after the implementation of TRIPS had been a subject of serious
concern and discussed in the TRIPS Council of WTO during the year
2001. The issue was further hotly debated in the Doha Ministerial
Conference held in November 2001. The result was the Doha
Declaration on TRIPS Agreement and Public Health which clarifies that
sufficient flexibilities and freedom to determine the grounds upon
which compulsory licences can be granted are available to all member
countries. It is now for these countries to exercise their right
and make suitable provisions in their national legislations.
While enacting the Indian
Patents (Second Amendment) Act 2002, however, this aspect did not
receive due consideration even when the Indian delegation was the
major player in the adoption of Declaration on TRIPS Agreement and
Public Health in November 2001.
There are clearly eight
possibilities of structuring the grant of compulsory licences
provisions arising from TRIPS Agreement and Paris Convention and as
clarified in the Doha Declaration on Public Health. These are :
(i) Authorisation for
meeting the government requirements;
(ii) Compulsory Licence
because of abuse of patents rights by the patent holder;
(iii) Compulsory licence
on offer of commercial terms and conditions and for reason of
unsuccessful attempt by an enterprise to obtain voluntary licence
from the patent holder;
(iv) Compulsory Licence due
to National Emergency;
(v) Compulsory Licence due
to circumstances of extreme urgency;
(vi) Compulsory Licence in
case of public non-commercial use;
(vii) Compulsory licence to
remedy anti-competitive practices; and
(viii) Second patent for an
invention involving important technical advance of considerable
economic significance over already existing patent.
Indian Patents Act 1970
The amended Indian Patents Act
1970 in Chapter XVI specifically deals with the “Working of
Patents,
Compulsory Licences and Revocation”. Section 83 of this chapter deals with
the General principles applicable to the working of patented
inventions. This Section is virtually the patent policy which the
Indian government would aim to accomplish through other Sections of
this Chapter. However, an indepth examination of formulations of
these other Sections leave some ambiguities which aught to be
rectified through further amendments to the Patents Act 1970. These
ambiguities can be examined with reference to the possibilities of
contingencies discussed earlier. This rectification will satisfy the
public interest fully.
ROYALTY PAYMENTS
Article 31(h) of TRIPS provides
that “the right holder shall be paid adequate remuneration in the
circumstances of each case taking into account the economic value of
the authorization”. This stipulation is not specific about the
rate of royalty that should be payable. The unamended Patents Act
1970 provided a ceiling of 4% on royalty payment. This provision has
been deleted and substituted by provision in Section 90 of the
amended Act which also does not stipulate any ceiling on payment of
royalty. Royalty payment because of long term of protection of 20
years for patents whether product or process has to be very carefully determined to
avoid long term burden on prices of the patented drugs. A ceiling of 5%
on royalty payment on ex-factory sales for the first five years
and ceiling of 2% for the rest of the patent terms could be provided
in the Patents Act or the Rules thereunder. This will help in
settling this issue between the patent-holders and the licencees
amicably.
CONCLUSIONS
International Human Rights Law is becoming a focused issue in
relation to the implementation of TRIPS Agreement on many basic and
fundamental rights of human being. These rights relate to right to
health and right to food. In relation to monopolization factor
under the TRIPS Agreement these issues are becoming crucial and are
being debated worldwide. Patents to protect innovation could be
supported, but the system should not be a devise to restrict
competition and allow creation of long term monopolies under any
circumstance. The originators of inventions should get their just
reward by way of suitable royalties and there should be no grudge in
providing the same. The doors should be opened for obligatory
licensing involving the domestic enterprises in the production of
patented drugs. The suggestions made in this Paper are within the
frame-work of the TRIPS Agreement. Judicious and careful
implementation of the TRIPS was needed for its smooth application and
balancing of rights and obligations of the patent holder in a manner
conducive to social and economic welfare as stipulated in Article 7
of the TRIPS Agreement. The lives of patients have to come before
the patents of drug companies and that is the fulfillment of the
objectives of the National Health Policy and the International Human
Rights Law.
*B.K. Keayla retired as Commissioner of Payments. Presently he is
Convener, National Working Group on Patent Law and Trustee & Secretary General of
Centre for Study of Global Trade System & Development.
November 19, 2008
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