Compulsory licensing of patents in India is an important mechanism under the Patents Act, 1970 that seeks to balance the exclusive rights of patent holders with the larger public interest. It allows a person or entity to use a patented invention without the consent of the patent owner, subject to statutory conditions and payment of reasonable remuneration.

The concept becomes particularly significant where a patented invention is not adequately available to the public, is priced beyond reasonable affordability, or is not sufficiently worked in India.

India's compulsory licensing framework is primarily contained in Chapter XVI of the Patents Act, 1970, covering Sections 82 to 98.

One of the most important developments in this area is the landmark Bayer Corporation v. Natco Pharma Ltd. dispute concerning the cancer drug Nexavar. The case remains a key reference point for understanding how the Indian patent authorities interpret the grounds for compulsory licensing.

What Is Compulsory Licensing of a Patent?

A compulsory licence is a statutory authorisation that permits a person or entity to manufacture, use or sell a patented invention without obtaining the voluntary permission of the patent holder.

However, compulsory licensing does not mean that the patent is automatically cancelled or that the patent owner loses all rights. Instead, the licence operates subject to terms and conditions determined under the Patents Act.

The law attempts to ensure that the patent system serves two objectives:

• Protection of innovation and investment;

• Availability of patented inventions to the public at reasonable terms.

Section 84 is the principal provision governing ordinary applications for compulsory licences in India.

Legal Framework for Compulsory Licensing in India

The compulsory licensing provisions are contained in Chapter XVI of the Patents Act, 1970.

Important provisions include:

Grounds for Compulsory Licence Under Section 84

Under Section 84 of the Patents Act, an application for a compulsory licence may generally be made after the expiration of three years from the date of grant of the patent.

The applicant must establish one or more of the statutory grounds.

1. Reasonable Requirements of the Public Are Not Satisfied

A compulsory licence may be granted where the reasonable requirements of the public in relation to the patented invention have not been satisfied.

This provision recognises that a patent monopoly should not prevent the public from obtaining access to an invention where sufficient supply or access is not being provided.

2. Invention Is Not Available at a Reasonably Affordable Price

A compulsory licence may also be sought where the patented invention is not available to the public at a reasonably affordable price.

This ground is particularly relevant in the pharmaceutical sector, where the price of patented medicines can directly affect access to essential treatment.

3. Patent Is Not Worked in India

The third major ground is non-working of the patented invention in the territory of India.

The concept of "working" is important because Indian patent law does not merely grant exclusive rights; it also seeks to ensure that patented inventions contribute to technological development and public benefit in India.

These three statutory grounds are expressly recognised under Section 84(1).

Who Can Apply for a Compulsory Licence?

Section 84 allows any person interested to apply for a compulsory licence, provided the statutory requirements are fulfilled.

The application must set out the nature of the applicant's interest and the facts supporting the application.

The applicant's ability to actually work the invention is also relevant. The Controller considers whether the applicant has the capacity and resources necessary to exploit the invention for public advantage.

Under Rule 96 of the Patents Rules, 2003, applications for compulsory licences under Sections 84, 91, 92 and 92A are made in Form 17 in the prescribed manner.

Factors Considered by the Controller

The grant of a compulsory licence is not automatic merely because an application has been filed.

Under Section 84(6), the Controller is required to consider several factors, including:

• The nature of the invention;

• The time elapsed since the patent was granted;

• Measures already taken by the patentee or licensee to make full use of the invention;

• The applicant's ability to work the invention to the public advantage;

• The applicant's capacity to undertake the financial risk involved;

• Whether the applicant made reasonable efforts to obtain a voluntary licence from the patentee.

For ordinary Section 84 applications, efforts to obtain a voluntary licence on reasonable terms are relevant. The statute provides exceptions to this requirement in situations such as national emergency, extreme urgency, public non-commercial use and certain anti-competitive practices.

Terms and Conditions of a Compulsory Licence

A compulsory licence is generally granted subject to conditions designed to protect both public interest and the legitimate interests of the patent holder.

Section 90 provides that the Controller should endeavour to ensure that:

• The royalty payable to the patentee is reasonable;

• The invention is worked to the fullest extent by the compulsory licensee;

• The patented product is made available at reasonably affordable prices;

• The licence is non-exclusive.

Therefore, compulsory licensing is not equivalent to taking away the patent owner's property without compensation. The patent continues to exist, while another party receives a statutory licence subject to defined conditions.

Section 92: Compulsory Licensing in Emergency Situations

Section 92 provides a special mechanism where the Central Government is satisfied that compulsory licensing is necessary in circumstances involving:

• National emergency;

• Extreme urgency; or

• Public non-commercial use.

The Central Government may issue a notification in the Official Gazette, following which an interested person may apply for a compulsory licence.

The provision is particularly significant in the context of public health emergencies, including serious epidemics and other situations requiring urgent access to patented technologies or products.

Unlike an ordinary Section 84 application, Section 92 does not require the applicant to wait for three years after the grant of the patent.

Section 92A: Compulsory Licensing for Export of Pharmaceutical Products

Section 92A addresses a different public-health concern: export of patented pharmaceutical products to countries that lack sufficient manufacturing capacity.

The provision enables compulsory licensing for the manufacture and export of patented pharmaceutical products to an eligible country facing public-health problems, subject to the conditions prescribed by the Act.

This provision reflects India's implementation of the international framework associated with the TRIPS Agreement and the Doha Declaration on TRIPS and Public Health.

Section 92A specifically deals with pharmaceutical products and can also cover ingredients required for their manufacture and diagnostic kits needed for their use.

Bayer Corporation v. Natco Pharma: India's Landmark Compulsory Licence Case

The most important Indian case on compulsory licensing is Bayer Corporation v. Union of India, arising from Natco Pharma's application concerning Bayer's patented cancer drug Sorafenib Tosylate, marketed as Nexavar.

In 2012, the Controller of Patents granted Natco a compulsory licence under Section 84.

The dispute subsequently went before the Intellectual Property Appellate Board and the Bombay High Court. The Bombay High Court ultimately upheld the compulsory licence framework applied in the case.

The case is particularly significant because it provided practical guidance on how the statutory requirements under Section 84 should be evaluated.

Why Was the Natco Licence Granted?

The Controller's decision focused on the statutory requirements relating to:

1. Reasonable requirements of the public;

2. Reasonably affordable pricing; and

3. Working of the patented invention in India.

The Controller granted Natco a non-exclusive, non-assignable compulsory licence for the remaining patent term, subject to conditions including payment of royalty to Bayer.

The original Controller order prescribed a 6% royalty on Natco's net sales, while the IPAB subsequently increased the royalty to 7%.

The Bombay High Court later upheld the grant of the compulsory licence.

Why Is the Bayer-Natco Case Important?

The Bayer-Natco dispute is important because it demonstrates that a patent monopoly in India is accompanied by statutory obligations relating to the working and availability of the patented invention.

The case is frequently discussed in relation to:

• Pharmaceutical patent rights;

• Access to medicines;

• Reasonably affordable pricing;

• Working of patents in India;

• Public interest;

• Compulsory licensing;

• Patent holder obligations; and

• The balance between innovation and public health.

It therefore remains essential reading for patent attorneys, pharmaceutical companies, innovators, generic manufacturers and students of intellectual property law.

Working of Patents and Form 27

The concept of working of patents is closely connected with compulsory licensing.

Section 146(2), read with Rule 131 of the Patents Rules, requires patentees and licensees to furnish statements regarding the working of patented inventions in India.

Importantly, the current rules provide for filing Form 27 once for every period of three financial years, beginning from the financial year immediately following the financial year in which the patent was granted. The statement is generally required within six months after the expiry of the relevant three-year period, subject to applicable extensions.

The Indian Patent Office continues to list Form 27 – Statement Regarding the Working of the Patented Invention on Commercial Scale in India among the prescribed patent forms.

Therefore, the statement that Form 27 is filed every year is no longer accurate under the current rules.

Can Non-Working Lead to Revocation of a Patent?

Yes.

Indian patent law provides a further remedy where a patent has not been worked in India and the statutory requirements remain unsatisfied.

Under Section 85, an application for revocation on the ground of non-working may become relevant after the statutory period following the grant of a compulsory licence.

This demonstrates that non-working can have consequences beyond compulsory licensing.

The statutory framework therefore creates a progression of remedies:

Patent granted → Non-working / inadequate availability → Compulsory licence → Possible revocation in appropriate circumstances

However, each remedy has its own statutory requirements and procedural safeguards.

Procedure for Obtaining a Compulsory Licence in India

A simplified overview of the process is as follows:

Step 1: Determine Eligibility

The applicant must determine whether the statutory requirements for seeking a compulsory licence are satisfied.

For a Section 84 application, the three-year period from the date of grant must generally have expired.

Step 2: Establish the Statutory Ground

The applicant should establish one or more grounds under Section 84, such as:

• Failure to satisfy reasonable requirements of the public;

• Unaffordable pricing; or

• Non-working of the patent in India.

Step 3: Attempt to Obtain a Voluntary Licence

For an ordinary Section 84 application, the applicant should generally demonstrate reasonable efforts to obtain a voluntary licence from the patent holder on reasonable terms.

The statutory exceptions under Section 84(6) must also be considered where applicable.

Step 4: File the Application

The application is filed before the Controller in the prescribed manner, generally using Form 17.

Step 5: Hearing and Consideration

The Controller considers the evidence, submissions of the parties and statutory factors before determining whether a compulsory licence should be granted.

Step 6: Determination of Terms

If the licence is granted, the Controller determines appropriate terms and conditions, including royalty and other relevant conditions.

Is Compulsory Licensing the Same as Patent Cancellation?

No.

This is an important distinction.

A compulsory licence does not ordinarily cancel the patent. Instead, it authorises another party to exploit the patented invention subject to statutory conditions.

The patent holder continues to retain the patent rights, including the right to receive remuneration or royalty as determined under the applicable licence.

By contrast, revocation results in cancellation of the patent rights and is governed by separate statutory provisions.

Compulsory Licensing vs Voluntary Licensing

The key distinction is that a compulsory licence is imposed through statutory authority rather than arising solely from the agreement of the patent owner.

Advantages of Compulsory Licensing

Compulsory licensing can play an important role in situations where exclusive patent rights create significant barriers to public access.

Public Health

It can facilitate access to essential medicines and healthcare technologies.

Affordable Access

It can help address situations where a patented product is not available at a reasonably affordable price.

Domestic Manufacturing

It can encourage working and manufacturing of patented inventions in India.

Public Interest

It provides a legal mechanism for addressing circumstances where private patent rights conflict with significant public needs.

Limitations and Safeguards

Compulsory licensing is not intended to become a routine method for bypassing patent rights.

The statutory framework contains several safeguards.

The Controller must examine the nature of the invention, the conduct and efforts of the patentee, the applicant's ability to work the invention, financial capacity and other statutory considerations.

Further, the terms of the licence must seek to preserve a reasonable advantage for the patent holder while ensuring that the invention is made available to the public at reasonably affordable prices.

Key Takeaways for Patent Owners and Generic Manufacturers

For Patent Owners

Patent holders should pay close attention to:

• Commercial working of the patented invention;

• Availability of the patented product in India;

• Pricing and accessibility;

• Compliance with Form 27 requirements;

• Licensing arrangements; and

• Evidence demonstrating efforts to satisfy public requirements.

For Potential Compulsory Licensees

An applicant should carefully evaluate:

• Whether the three-year statutory period has expired;

• Which Section 84 ground is applicable;

• Evidence of public requirement or unaffordability;

• Evidence concerning non-working;

• The applicant's technical and financial capability;

• Efforts to obtain a voluntary licence; and

• The terms and conditions that the applicant is willing to accept.

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Conclusion

Compulsory licensing of patents in India represents one of the most important safeguards within the Indian patent system. It recognises that patent rights are intended to encourage innovation while also ensuring that patented inventions are sufficiently available to the public.

Section 84 provides the principal route for obtaining a compulsory licence where the reasonable requirements of the public are not satisfied, the patented invention is not available at a reasonably affordable price, or the invention is not worked in India.

Sections 92 and 92A provide additional mechanisms for emergency situations and international public-health requirements.

For patent owners, pharmaceutical companies and prospective licensees, a clear understanding of Sections 84, 85, 90, 92 and 92A of the Patents Act, 1970, together with the relevant Patent Rules and case law, is essential for effective patent strategy and compliance.