The COVID-19 pandemic has posed some unusual problems for states and markets all over the world. While medical science and pharmaceutical professionals continue their search for the best drug or vaccine solution for the pandemic, one challenge lies in how this can be equitably distributed to the global population without compromising on various interests. Patent protection lies at the heart of this debate, and the push-and-pull of public interest versus commercial interests takes centrestage; while the former is of paramount importance, the latter cannot be completely ignored either.
Both governments and private firms are aware of these challenges. Already, considering the unprecedented nature of this pandemic, some companies are prepared to forego their patent rights entirely, and have publicly stated that they do not intend to seek patent protection for any solutions they may come up with (the US company AbbVie has decided to not enforce patents for its drug Kaletra that is being tested for COVID-19). Equally, governments across the world (including Canada, Germany, and Israel) have tried to take steps that will potentially help the government make and use patented inventions as needed in fighting the pandemic. This note examines the possible solutions regarding this situation in India, given the law and judicial precedent in this regard.
The Indian Patents Act, 1970 (the Act) provides the Indian Government with various options to circumvent or amend patent rights in the event of a pandemic such as COVID-19. These provisions can be categorized into three types, which are discussed below.
Use by Government
The royalty free use of a patented invention by the Central Government is a condition for a grant of a patent in India. Accordingly, a patented invention may be imported by the Government or made by or on behalf of it “for the purpose merely of its own use” (Section 47). What constitutes “merely of its own use” remains debatable, although one High Court extended this to a contractor satisfying a tender issued by the Central Government (Chemtura Corporation Vs. Union of India and Ors., MIPR 2009 (3) 287 ). In this case, the patentee’s participation in the tender was construed to signify consent; the words “merely of its own use” were construed to mean the use for the “purposes of Government”. This effectively brings under its ambit any department of the Government, and servants and agents of the Government who perform or are in discharge of duties assigned to them, irrespective of who is benefited by such use. The meaning of “use” is strictly restricted to the ‘direct use’ by a Government department or its servants. Thus, the end use has to be for the Government or its department exclusively.
This provision also allows the Government to import any medicine or drug for distribution in any dispensary, hospital or other medical institution involved in public service.
A third person can also be allowed to use a patent for the “purposes of government” by payment of a royalty by the Government or a Government undertaking, or any person authorized by it (Sections 99-100). However, a High Court decision (Garware Wall Ropes Ltd. Vs. A.I Chopra, 2009 (3) Bom CR 896) clarifies that such use contemplates a separate, clear and direct authority from the Central Government or its departments in writing. The Government is not entitled to use a patent without any cost for any purpose other than “merely of its own use’. It was also held that an agreement in the name of the President of India signed by the officers of a Government department is not the kind of authorization contemplated by the law.
Acquisition by Government
The Act, under Section 102, empowers the Central Government to acquire a patent from an applicant or patentee if it deems it necessary for a public purpose. This acquisition of the patent is pursuant to a compensation that is agreed upon and paid by the Government to the patentee and other right holders. Should an agreement not be reached on the compensation, it shall be determined by the High Court by relevant factors including the expenditure incurred, patent term, the manner and extent to which the patent has been worked.
A Compulsory License may be granted to any “person interested” (defined in Section 2(1)(t)), which includes a person engaged in or promoting research in the same field to which the invention relates. This license is granted after the expiry of three years from the grant of a patent on the grounds (Section 84) that-
- The reasonable requirements of the public have not been met, or
- The patented invention is not available to the public at a reasonably affordable price, or
- The patented invention is not worked in India
A Compulsory License may also be issued for export of patented pharmaceutical products to a country having insufficient or no pharmaceutical manufacturing capacity for the concerned product. The country to which export of the pharmaceutical is intended should either issue a Compulsory License or issue a notification allowing importation from India (Section 92A).
The Central Government can also issue the license in case of a national emergency, extreme urgency or public non-commercial use (by way of a notification in the official Gazette). If the Controller is satisfied of these situations existing, which would include a public health crisis such as an epidemic, the Government is exempted from the procedure laid down for the application of a Compulsory License (Section 92). The Controller is required to ensure that the royalty to the patentee is reasonable, as well as the availability of the articles manufactured under the patent at the lowest prices (Section 90).
The Way Forward
The Indian Government, pursuant to its right to use, may import a drug/vaccine for distribution in any hospital, dispensary or other medical institutions. In such a case, the product may be used royalty free or by providing adequate remuneration (Section 100). This is designed to ensure that the product is available at affordable prices.
Similarly, a patent that is granted or pending can be acquired in exchange for an agreed-upon compensation having regard to its economic value. Subsequently, the Government can allow local companies to manufacture the drug/vaccine in question. This solution is not without concerns. For example, this would involve price regulation by the Government, and the patentee may not be able to recover their investment. This could have a snowball effect on future investment in research and development, as well as a corresponding impact of the incentives for other innovators. Further, in the process of acquisition by the Government, if no agreement is reached upon with regard to compensation, it becomes the duty of the High Court to make such determination. There is a high likelihood that such an exercise would inadvertently delay the process of obtaining the patent and making the product accessible to the public.
Another avenue available to the Government is through the issuance of Compulsory Licenses. Assumingthat a drug/vaccine solution for COVID-19 would involve a new patent application, it would be impossible for a private entity to apply for a Compulsory License, given the three-year wait-time for such applications under the law.
However, this three-year wait-time does not apply to the Government, which has the special power to bypass this time period in specified extraordinary situations. A public health crisis, as the COVID-19 pandemic is, would easily be justified under this provision. An interested person can then make an application for a Compulsory License which will be granted on the terms and conditions that the Controller deems fit. This route will save valuable time in making the invention available in the country.
But this too comes with its challenges: the wide berth granted to the Controller in the grant of a Compulsory Licence may result in patentees being dissatisfied with how their commercial interests have been addressed. Compulsory Licensing of drugs in the past has also led to threats of trade retaliation and political pressure by the host country of (foreign) patentees (e.g., granted to NATCO Pharma for the drug Nexavar).
A survey of the law and judicial precedent shows that there is clearly no perfect solution or ideal route forthe Indian Government to pursue. Arguably, the special provision for Compulsory Licensing by the Government would seem to be the best-case scenario. This would fast-track the process of making the product available to the public, and at the same time, ensure that the patentee derives a reasonable advantage from their rights. Combined with some companies already offering to forego their patent rights should they find solutions to the pandemic crises, private firms may in fact be more receptive than expected towards receiving a reasonable remuneration through a Compulsory Licensing arrangement.
Note: Seerat Bhutani, intern, assisted in writing this article.