Compulsory Licenses in Patent Law: Bridging the Gap Between Monopoly Rights and Public Interest

A patent gives its holder an exclusive right – a monopoly, essentially – over an invention for up to 20 years. This exclusivity is the reward for disclosing an innovation to the public. But what happens when that monopoly results in a life-saving drug being priced beyond the reach of millions? This is the precise tension that compulsory licensing in patent law is designed to resolve. It is one of the most consequential tools in intellectual property law, sitting at the intersection of private rights and public welfare – and for Indian law students, understanding it is non-negotiable.

What is a compulsory license? 🔗

A compulsory license is an authorization granted by the government that permits a third party – a company or individual – to use, manufacture, or sell a patented invention without the consent of the patent holder. In return, the patent holder receives a royalty or predetermined fee. It is one of the flexibilities in patent protection included in the WTO’s TRIPS Agreement and has existed since the agreement took effect in January 1995.

The key distinction from a voluntary license is obvious: the patent holder has no say in whether the license is granted. The state steps in and overrides the monopoly right – not to punish the inventor, but to ensure that the public interest is not held hostage to it. In practice, compulsory licenses have been used most powerfully in the pharmaceutical sector, where the stakes – access to medicine versus profit – are literally a matter of life and death.

The legal framework in India: Chapter XVI of the Patents Act, 1970 🔗

The legal basis for compulsory licenses in India is found under Chapter XVI of the Indian Patents Act, 1970, read with the Indian Patent Rules, 2003. The scheme is well-codified and aligns with India’s international obligations. There are several distinct routes through which a compulsory license can be granted.

Section 84: Application by any interested person 🔗

This is the primary provision. Under Section 84(1) of the Patents Act, any person may apply to the Controller of Patents for a compulsory license after three years from the date of the patent’s grant, on one or more of the following grounds:

• The reasonable requirements of the public with respect to the patented invention have not been satisfied;
• The patented invention is not available to the public at a reasonably affordable price; or
• The patented invention is not worked in the territory of India.

The three-year window is deliberate – it gives the patent holder a reasonable opportunity to commercialise the invention before the state can intervene. Importantly, before filing an application, the applicant must demonstrate that they made efforts to obtain a voluntary licence from the patent holder on reasonable terms, and that those efforts failed within a reasonable period (ordinarily not exceeding six months).

Section 92: Government notification in cases of national emergency 🔗

Unlike Section 84, which requires a third-party application, Section 92(1) allows the Central Government to grant a compulsory license suo motu – on its own motion – in three situations: national emergency, extreme urgency, or public non-commercial use. In these cases, the usual requirement of prior negotiation with the patent holder is waived. The government issues a notification, and the Controller may then grant licenses to any applicant.

This provision is significant because it places the decision-making power squarely with the executive branch when the public need is acute. The phrase “extreme urgency” has been interpreted broadly enough to cover public health crises, which aligns with India’s obligations under international agreements discussed below.

Section 92-A: Compulsory licenses for export of pharmaceutical products 🔗

This provision was inserted into the Patents Act specifically to implement paragraph 6 of the Doha Declaration, which recognized that WTO members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under TRIPS. Section 92-A allows India to manufacture and export patented pharmaceutical products to countries that lack sufficient manufacturing capacity to address their own public health problems. Exports are permitted primarily to countries that have themselves granted a compulsory license or have otherwise notified their willingness to import the product from India.

Sections 100 and 102: Government use 🔗

Under Section 100 of the Indian Patent Act, a compulsory license can be issued by the Government on a patented drug for use by the Government itself. Section 102 further allows the Government to acquire a pending or already-granted patent for public use, with royalties payable to the patentee as mutually agreed.

The application process: how does it work? 🔗

Any party seeking a compulsory license under Section 84 must file a request – online or on paper – using Form 17, along with the prescribed fee at the Indian Patent Office. The form must state the applicant’s interest and the grounds on which the application is based.

Once filed, the Controller analyses the prima facie case made by the applicant against the patentee and considers whether the applicant made genuine efforts to obtain a voluntary licence. If the Controller is not satisfied, a notice is issued to the applicant, who may request a hearing within one month. If the matter is decided in favour of the applicant, the Controller determines the terms of the licence – including the royalty payable to the patentee.

Patentees and licensees are also required under Section 146(2) to submit annual statements in Form 27 detailing the extent to which the patent has been worked commercially in India. Failure to file this information creates a presumption of non-working and can support a compulsory license application. Knowingly furnishing false information is punishable with imprisonment of up to six months, a fine, or both.

TRIPS Agreement and compulsory licensing 🔗

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which came into force in January 1995 under the WTO framework, is the central international instrument governing patent law globally. Article 31 of TRIPS, without using the words “compulsory license,” sets up a procedure by which a member state may permit the use of a patent by the government or a third party.

Crucially, Article 31(f) requires that any compulsory licence granted be predominantly for the supply of the domestic market of the member granting the licence. This created a problem: countries with little or no pharmaceutical manufacturing capacity could issue a compulsory licence, but would have difficulty sourcing the generic medicine from abroad because the exporting country’s own compulsory licence would have to be “predominantly for domestic use.” This is the so-called “Paragraph 6 problem” that the Doha Declaration was tasked with resolving.

Before India joined TRIPS, Indian patent law did not permit product patents for pharmaceuticals. After India acceded to TRIPS, the patent laws were amended to allow product patents, giving patentees greater control over the availability and pricing of drugs. As a result, Indian patent law incorporated more comprehensive compulsory licensing provisions to prevent abuse of these expanded patent rights.

The Doha Declaration, 2001: reaffirming public health flexibility 🔗

The Doha Declaration on the TRIPS Agreement and Public Health was adopted by WTO member governments at the Fourth Ministerial Conference in Doha, Qatar, on 14 November 2001. Its purpose was direct: to respond to concerns that TRIPS was making essential medicines unaffordable in developing countries.

The declaration makes it clear that each WTO member is free to determine the grounds upon which compulsory licences are granted. This was an important clarification because there had been a view – sometimes pressed by pharmaceutical industry lobbies – that compulsory licensing required some form of emergency as a precondition. The Doha Declaration firmly rejected this reading.

The declaration also clarified that public health crises – including HIV/AIDS, tuberculosis, malaria, and other epidemics – can constitute national emergencies or circumstances of extreme urgency for the purposes of compulsory licensing. It also extended the transition period for least-developed countries, stating they did not have to protect pharmaceutical patents until 2016.

To address the Paragraph 6 problem, the WTO adopted a formal mechanism on 30 August 2003, waiving Article 31(f) for exports of pharmaceutical products to countries with insufficient manufacturing capacity. This waiver was eventually codified as Article 31bis of the TRIPS Agreement in 2017 – making it a permanent amendment to the treaty.

India’s landmark case: Natco Pharma v. Bayer Corporation (2012) 🔗

The most significant application of compulsory licensing in India came in 2012. On 9 March 2012, the Indian Patent Office granted the country’s first ever compulsory licence to Natco Pharma Ltd. to produce a generic version of Bayer’s patented drug Nexavar, used in the treatment of liver and kidney cancer.

The grounds for the grant were that the drug was not being manufactured in India, and was sold at approximately €3,200 for a monthly treatment course, making it inaccessible to the public at a reasonable price. The Controller found that Bayer had failed on all three grounds under Section 84(1): the reasonable requirements of the public were not satisfied, the drug was not available at a reasonably affordable price, and the invention was not being worked in India.

Bayer challenged the order before the Intellectual Property Appellate Board (IPAB), which upheld the Controller’s decision, holding that the right of access to affordable medicine was a matter of the right to dignity of patients. The IPAB noted that granting a stay would jeopardize the interests of patients who needed the drug at a critical stage of their illness. The Supreme Court later also declined to interfere. The case remains the touchstone for compulsory licensing jurisprudence in India.

The balance compulsory licensing seeks to strike 🔗

Compulsory licensing is often mischaracterised as an attack on innovation or a disincentive to invest in research. That framing misses the point. The compulsory licence serves to strike a balance between two disparate objectives: rewarding patentees for their invention, and making patented products – particularly pharmaceutical products – available to large populations in developing and underdeveloped countries at an affordable price.

Crucially, compulsory licensing does not strip the patent holder of all rights. The patentee continues to receive royalties. The licence is typically non-exclusive, meaning the original patent holder can still manufacture and sell the product. And the licence is bounded in scope, duration, and territory. What it removes is the absolute veto power of the patent holder over who can produce the invention and at what price.

For India – which is often described as the “pharmacy of the developing world” given its generic manufacturing capacity – getting this balance right has global implications. Indian generic companies supply affordable medicines to dozens of low-income countries. The compulsory licensing framework under Sections 84, 92, and 92-A of the Patents Act is a critical part of that ecosystem.

Compulsory licensing and COVID-19: a missed opportunity? 🔗

The COVID-19 pandemic tested global compulsory licensing frameworks. Several countries – including Brazil, Colombia, Ecuador, and Australia – amended or invoked their laws to facilitate faster access to patented medicines and vaccines. In India, however, scholars have argued that compulsory licensing provisions under the Patents Act remained largely unused during the pandemic, at a significant cost to public health and welfare. Despite India’s own robust legal framework, political and diplomatic pressures made formal invocation difficult. The episode underscores that a strong law on paper is not sufficient – its actual deployment depends equally on political will and institutional readiness.

What do you think? Given that India’s compulsory licensing framework was largely unused during the COVID-19 pandemic despite clear public health needs, should the law be amended to create a faster, more automatic trigger for compulsory licenses in declared health emergencies? And does the requirement to first attempt a voluntary licence before approaching the Controller under Section 84 serve as a meaningful safeguard – or does it simply delay access to essential medicines?

References

1. https://byjus.com/free-ias-prep/compulsory-license/
2. https://legalblogs.wolterskluwer.com/patent-blog/compulsory-license-india/
3. https://ssrana.in/ip-laws/patents/compulsory-licensing-patents-in-india/
4. https://www.wto.org/english/tratop_e/trips_e/healthdeclexpln_e.htm
5. https://intellectual-property-helpdesk.ec.europa.eu/news-events/news/compulsory-licensing-india-and-changes-brought-it-trips-agreement-2021-10-12_en
6. https://msfaccess.org/sites/default/files/2021-05/COVID_TechBrief_MSF_AC_IP_CompulsoryLicensesTRIPSWaiver_ENG_21May2021_0.pdf
7. https://or.niscpr.res.in/index.php/JIPR/article/download/602/2257/25525