What limitations does TRIPS put on compulsory licensing?

This Kat has been thinking more about compulsory licensing provisions and what is permitted under the TRIPS agreement, following the post yesterday about this Decision of the Controller of Patents Mumbai concerning compulsory licences in the field of pharmaceuticals.  This post has attracted the largest amount of e-mail correspondence of any post by this guest Kat, although not so many public comments.

Firstly, a very kind reader has pointed the IPKat to this link on the SpicyIP blog, which has the consolidated version of the Indian Patents Act 1970 that the IPKat lamented not being able to find yesterday.  Sincere and heartfelt thanks both to the SpicyIP blog itself, and to the IPKat’s modest informant.

SpicyIP also has an interesting and thorough analysis of the decision, with a large number of comments, which interested readers can find here.  A further Katpat to Spicy IP for this piece.

Thinking further about the Decision, this Kat is troubled by the third ground in Section 84 for granting a compulsory licence in India, namely “that the patented  invention is not worked in the territory of lndia”, in particular when read in conjunction with Section 83 “Patents  are  not  granted  merely  to enable patentees to enjoy a monopoly for importation of the patented article”, and the way that this was interpreted in the Decision, viz., that if a patented product is not manufactured by the patentee in India, but is imported from abroad, then a compulsory licence to manufacture in India can be obtained.

In the UK, it was considered that TRIPS Article 27 “patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced” prevented lack of local manufacture from being a ground for granting a compulsory licence.  Therefore, in the provisions for the situation where the patentee is from a WTO member state (Section 48A), the ground for a compulsory licence that “demand for the product in the United Kingdom is being met … by importation …” was omitted, although it survives in Section 48B, covering the situation where the patentee is not a WTO proprietor.  (Readers can view the relevant sections at the consolidated version of the UK Patents Act 1977 here).

In the meantime a big Katpat to Cathal Lane from Tomkins who sent a link to this seminal Irish case on compulsory licensing Allen and Hanburys Ltd. v. Controller of Patents, Designs and Trademarks [1996] IEHC 59.

Although the issue in that case was discrimination by field of technology, the reasoning is applicable mutandis mutatis to discrimination on the basis of lack of domestic working, because Art 27 treats them in exactly the same way.  Art 27 was clearly understood in the Irish decision (as far as this Kat reads it) to prohibit compulsory licensing provisions that discriminate in the manner that Art 27 forbids.  For example, the Irish decision states “It is not contested that Section 42 [the provision in question relating to compulsory licences] does permit discrimination as to the field of technology in respect of enjoyment of patent rights contrary to Article 27(1) of TRIPS”. [feline emphasis]

It appears that the UK, and Ireland, interpret TRIPS Art 27 as not permitting any limitation of patentee's rights, including grant of a compulsory licence, simply because the patentee is not manufacturing in the territory but is importing the product.

India, on the other hand, appears not to share this interpretation, and considers that it has a right under TRIPS Art 31 to grant compulsory licences under a wide variety of conditions, including lack of domestic manufacture. Support from this could be considered to come from the wording in the Doha Declaration “Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.”

The Indian Decision is quite explicit on the freedom of the Indian legislature to provide for compulsory licensing on the grounds of lack of domestic manufacture:

“When the Article 27(1) of TRIPS Agreement is read with the afore-mentioned provisions of  TRIPS  Agreement  and  the  Paris  Convention,   it  follows  that importation of a patented invention shall not result in forfeiture of a patent. However, a reasonable fetter on the patent rights in the form of a compulsory license is very well within the purview of the Paris Convention and TRIPS Agreement, when there is an abuse of patent rights. It is this flexibility that the Parliament have invoked in Chapter XVI of the Patents Act, 1970 by incorporating a provision for grant of compulsory  license  upon  failure  to  work  the  invention  within  the territory of India.”

And, later:

“it is clear to me that a patentee is obliged to contribute towards the transfer and dissemination of technology, nationally and internationally so as to balance the rights with the obligations. A patentee can achieve this  by either  manufacturing  the  product  in  India or  by granting  a license to any other person for manufacturing in India. Unless such an opportunity for technological capacity building domestically is provided to the Indian public, they will be at a loss as they will not be empowered  to  utilise  the  patented  invention, after the  patent right expires,  which certainly cannot  be the  intention  of  the  Parliament. Hence it follows that 'worked in the territory of India'  implies manufactured in India  to  a  reasonable  extent so that  the  principles enumerated in Section 83 can be brought into effect. In the absence of manufacturing in India, Section 83 will be a dead letter.”

The Decision thus justifies the apparent violation of Art 27 of TRIPS by stating that TRIPS only prohibits discrimination by way of patent forfeiture, but permits discrimination by way of compulsory licence.  Essentially, the view taken is that Art 27 implies no more than Art 5 of the Paris Convention, which states (at the operative part):

(1) Importation by the patentee into the country where the patent has been granted of articles manufactured in any of the countries of the Union shall not entail forfeiture of the patent.
(2) Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.

This is not how certain other countries, such as the UK and Ireland, have understood TRIPS, and this Kat finds it difficult to read TRIPS Art 27 as being no more than declaratory of the position under the Paris Convention.

In view of the fact that none of this has anything to do with pharmaceuticals, public health, price of the patented goods, or behaviour on the part of the patentee – it apparently applies in all technologies and all circumstances, this Kat is troubled that lack of domestic manufacture AS SUCH seems to be regarded as permissible in India as a ground for granting a compulsory licence.  It seems strange that India should regard this as compatible with TRIPS when other countries do not.  Can it really be expected that every patentee should either manufacture in India or license local manufacture during the lifetime of the patent?  Whereas there may certainly be situations where compulsory licence provisions can be justified and could indeed be essential to a balanced patent system (such as public health and access to medicines), this Kat does not see that lack of domestic manufacture should by itself be such a situation.

The IPKat is sure that there are other aspects of this Decision that merit study, thought and comment, but today restricts mews-ings to this point.

Over to you dear readers.  What do you think? Is there some factor that this Kat has overlooked?

What limitations does TRIPS put on compulsory licensing? What limitations does TRIPS put on compulsory licensing? Reviewed by Darren Smyth on Thursday, March 15, 2012 Rating: 5

1 comment:

  1. Rumour goes that this is done to keep people in India happy when India will, later this month, agree with request of the EU to provide patent protection for second medical use...

    So perhaps this may be merely an isolated case for political purposes rather than the start of a trend.


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