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Compulsory license is a measure to recognize third party rights in the patents. Compulsory license is defined to mean an authorization permitting a third party to make, use or sell a patented invention without the patent owners consent. If the patent owner does not exploit the invention or if he is unable to work on it in order to satisfy the needs of the society, usually compulsory licensing of inventions may be sought by any interested party to exploit the invention. Unexploited or improperly exploited inventions could be exploited through the instrument called compulsory licensing. Compulsory licenses are generally authorized in the public interest, in the event of undesirable practices such as anti-competitive, non-working, high prices or blocking behavior by the patentee. In fact compulsory licensing ensures transfer of technology from the laboratory to the commercial market. Compulsory licensing lifts the invention from the patent owner's monopoly by the government to the licensee working in the commercial market. Any interested party can file an application to the government of India seeking compulsory license on any invention. The Government grants compulsory licenses to widen the distribution of and increase access to the patented technologies. Compulsory license may be granted against the payment of reasonable royalty to the patent owner as determined by the government.

Compulsory licensing under the TRIPS agreement

During the various rounds of discussion at the time of the formation of WTO which adopted number of agreements including TRIPS the nations participated in the discussion were divided into two groups. One group comprising of mostly developing countries contended for compulsory licenses to be incorporated formally in the TRIPS agreement. These countries wanted to use compulsory licensing as a measure by the government in the public interest to regulate patent monopoly. It is also viewed as measure to control the market to see that it is not monopolized in a way against the public interest. The other group mostly comprising of developed nations contended for strong protection of intellectual property rights. These nations argued against compulsory licensing of inventions and contended that it would discourage innovation and creation. Finally, due to the pressure of developing nations which have successfully presented the case for compulsory licensing with reference to:

(1) How it serves the public purpose,

(2) How it could be used sparingly,

(3) How transparently it could be granted,

(4) How it balances both the interest of inventor and the public,

(5) Why it is required in the market and

(6) What it guarantees.

The developed nations agreed to incorporation of compulsory license in the spear of patent law unwillingly but could strongly advocate that it should be left to the member states and there shall be no hard and fast rule in this respect. Accordingly, under the TRIPS agreement scope has been provided for compulsory licenses and it is left to the member states to assess the situation and grant compulsory licenses in the public interest if necessary. The agreement postulates a comprehensive framework for the compulsory licensing of inventions. It states that member states may grant compulsory licenses in case of public emergencies in public interest. However compulsory licensing comes into picture only when the inventor is not exploiting the invention in order to make it available to the public or not offering the products of the invention at affordable prices. Further, before applying for compulsory license the applicant must exhaust all other ways to get the authorization from the patent owner to work on the invention. Perhaps it is the voice of the developing countries such as India which could see some scope for compulsory licensing in the international agreements such as TRIPS. Countries like India strongly advocate for compulsory licensing of inventions in the general interest of the public.

Compulsory licensing in India

The patent Act says that the patent owner must exploit the invention after obtaining the patent. Section 84 of the Act talks about compulsory licensing of patented inventions in public interest. The patent owner is not supposed to keep the invention without working on it. He should work on it to fulfill the reasonable requirements of the public connected with the invention. The Patent Act states that if the patent owner does not exploit the invention, any interested person can seek compulsory license to work on the invention. However, compulsory license can be sought after the expiry of three years from the date of granting and sealing of the patent in India. Further, the person seeking compulsory license must have exhausted all the other avenues to work on the invention. Such as; the inventor was approached for a license or assignment of the invention. The applicant must have sought authorization from the inventor for working on the invention before approaching the court of law for the grant of compulsory license. The objective behind granting compulsory license is to exploit the invention in order to satisfy the needs of the public. As per the provisions of the Indian Patent Act, compulsory licenses may be sought on the following grounds.

(1) The reasonable requirements of the public with reference to the patented invention have not been satisfied.

(2) The patented invention is not available to the public at a reasonably affordable price

(3) The patented invention has not been exploited or worked in India.

(4) The applicant has exhausted all other avenues to work on the invention.

(5) The court is satisfied that a situation has arisen where a compulsory license is the only method to see that public demand is met on the invention.

In Bayer Corp v UOI on 9 March 2012 the Indian Patent Office granted its first Compulsory License to Natco Pharma Ltd. for producing a generic version of Bayer Corporations's patented medicine Nexavar which is used in the treatment of Liver and Kidney cancer. While the multinational giant was selling the drug at Indian Rs 2.80 lakh for a month's course, Natco promised to make available the same at a price of Indian rupees 8800. . Natco was directed to pay 6% of the net sales of the drug as royalty to Bayer. Among other important terms and conditions of the non-assignable, non-exclusive license was directions to Natco to manufacture the patented drug only at their own manufacturing facility, selling the drug only within the Indian Territory and supplying the patented drug to at least 600 needy and deserving patients per year free of cost. Aggrieved by the Controller's decision, Bayer immediately moved to the Intellectual Property Appellate Board (IPAB) for stay on the order alleging that the grant of compulsory license was illegal and unsustainable.

The Board rejected Bayer's appeal holding that if the stay was granted, it would definitely jeopardize the interest of the public who need the drug at the later stage of the disease. It further held that the right of access to affordable medicine was as much a matter of right to dignity of the patients and to grant stay at this juncture would really affect them. The Board stated that the invention must be available to the public at a reasonably affordable price and if not, compulsory license can be issued and observed that the sub-sections (a), (b) and (c) of section 84(1) are separated by the disjunctive "or'' and therefore, even if one condition is satisfied, the Controller will be well within his rights to order compulsory license. The Board further noted that the research and development costs and the prices of other drugs do not assist in deciding what the public can afford reasonably. It stated that the reasonably affordable price necessarily has to be fixed from the viewpoint of the public and the word "afford" itself indicates whether the public can afford to buy the drug.

The Board held that the Controller was right in holding that the sales of the drug by the appellant at the price of about 280,000/- was alone relevant for the determination of public requirement and he was also right in considering the purchasing capacity of the public and the evidence available to conclude that the invention was not reasonably affordable to the public. Perhaps, before granting compulsory license, the patent office must give the inventor an opportunity of being heard on the issue. Cases of compulsory licenses cannot be decided ex parte and the inventor always stands an opportunity to present his or her case against the compulsory license before the court of law. There is a possibility of not granting compulsory license if the inventor satisfies the court that he had valid reasons for not properly working on the invention.

If the inventor undertakes to work on the invention in a way to satisfy the public demands connected with the invention, the authorities may not grant compulsory license on the invention. Further, in case of international patents, if the invention is not exploited in India though the invention is protected in India, compulsory license can be obtained to work on it in India. Compulsory license could also be sought even when the patent owner is working on it, if the needs of the public are not satisfied or if the price of the products of the invention is not affordable to the public. Compulsory licenses are granted to interested parties to commercially exploit the inventions to serve the needs of the public.

Mode of granting compulsory license

The application for compulsory license shall be accompanied by a statement setting out the nature of the applicant's interest together with such particulars as may be prescribed and the facts upon which the application is based. Another prerequisite is that; before applying for compulsory license the applicant must have exhausted all the other possibilities to work on the invention as mentioned earlier. He must have approached the patent owner for the license or assignment of the patent and must have been rejected by the inventor. Credible evidence to this effect shall be supplied along with the claim for compulsory license. The copies of the application for compulsory license shall be served on the patent owner and any other interested persons to invite their objections. Statements by the patent owner and others interested in opposition to the grant of compulsory license shall be served on the applicant. Both the parties will be heard by the patent office before deciding to grant or not to grant compulsory license. Besides, a person having a general license to work on the invention may also apply for compulsory license.

In such cases by amending or abandoning existing license compulsory license can be granted. Further, if the patent owner owes more than one patent those are related to each other and if it is not possible to work on one patent without infringing other patents the patent controller may grant compulsory license with reference to other patents also to enable the licensee to work on the patents efficiently. Generally, compulsory licenses are granted subject to following conditions or patent office may impose following conditions while granting compulsory licenses.

(1) Royalty shall be paid to the patent owner or persons entitled to the benefit of the patent.

(2) The invention shall be exploited to the fullest extent.

(3) The products of patented inventions must be made available to the public at reasonably affordable prices.

(4) The licensee shall not assign or license the patent further.

(5) The license is only for the remaining period of the patent.

(6) The licensee shall not import the licensed product or the products of licensed process from abroad.

(7) The license should not be abused or misused.

The Patent Act states that the central government may at its satisfaction in circumstances such as national emergency or extreme urgency may make a declaration in the official gazette authorizing the controller of patents to grant compulsory license on any patent subject to such terms and conditions. In such situations, in order to serve the public interest, the government might authorize granting of compulsory licenses. Such licenses are granted to exploit the inventions for noncommercial purposes in order to secure the availability of a patented product or articles or substances made out of a patented process at the lowest prices to the public. Especially, in case of patents on food products and medical products compulsory licenses are granted on the declaration made by the central government to meet the emergencies. In case of shortage of food or in the light of prevailing drought conditions or floods or earthquakes in order to serve food to the needy, the government may authorize the granting of compulsory license on such patents on food articles.

Further, in case of spread of diseases to supply drugs and medicines at the lowest prices or at free of cost compulsory licenses may be authorized on the patents on medical inventions. In such cases, the inventor or the owner of the patent may not be given the opportunity of being heard before granting the compulsory license. Once granted the compulsory license holder shall work on the invention in the light of the terms and conditions imposed on him. If he fails to meet any of the terms and conditions compulsory license may be revoked on the application of the patent owner or any interested person. Further, compulsory license may also be revoked if the licensee is abusing it or not exploiting it properly to satisfy the needs of the public or the patent owner establishes that the situations that warranted the granting of compulsory license have changed. Compulsory license is an instrument to exploit the invention, which has remained unexploited. It is a weapon in the hands of the government to keep vigilance on the patent owners who shall meet the requirements of the public in exploiting the inventions. The Patent Act intends to serve the public purpose in granting compulsory licenses in order to make the products of a patented invention available to the public at affordable prices. A person having compulsory license over a patent can also institute an infringement suit as if he is the owner of the patent.


Submitted By: Sanskriti Vats

IIMT, Guru Gobind Singh Indraprastha University

4th year, B.A.LLB(H)

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