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The mandatory patent license issued by India to Nexavar bears several legal implications. According to the legal provisions on Patents Act in section 84 of the Indian laws, the price of the drug was too high and beyond the reach of most Indians. Also, this section of the Patents Act highlights that a compulsory license may be issued to a particular drug if the invention or intellectual property deal was not originated within the home county. The two provisions captured the case of Sorafenib that was traded using the name Nexavar (Chaves and Oliveira 54).
The market price of the drug was relatively high compared to the generic versions of the drug manufactured locally. For instance, Nexavar was trading at slightly over $5,000 US per patient per month, while the generic one was going for only $165 per patient per month. The huge difference in market price triggered the litigation process because the state argued that it was not reasonably affordable.
Nonetheless, the aspect of compulsory license has been vividly addressed in section 84 of India’s Patent Act. To begin with, when a patent has been granted for three years, any interested individual is free to apply to the Controller requesting the concerned department to impose a mandatory license to a patent. However, such a request ought to be within the provisions of the law as stated in section 84. If any person feels that public interest has not been satisfied by a given patent, then he or she can forward an application for a compulsory license (“Trips: Text of the Agreement” par. 5).
Second, the law requires that any given patent should be readily affordable to members of the public. If the cost of purchasing the product is beyond the reach of most people, a compulsory license may be granted upon request. Third, a compulsory license is granted if the invention was not carried out within India. Article 83 clearly states that the reasons for granting patents are not just for facilitating the patentees to harvest the benefits of single-handed importation of the patents. Also, the functionality of a patented invention is not tantamount to mere importation, as indicated on page 43.
Imposing an involuntary contract is the basic tenet of the compulsory patent license. In this case, the patentee is Bayer, who is also the manufacturer of Nexavar. Using patented technology attracts compensation to the patentee. The latter is usually part and parcel of the agreement.
The TRIPS agenda has to be included in the intellectual property ideals as adopted across the globe. In any case, the growth of world trade coupled with the rising importance of international intellectual property rights has brought a sharp focus on matters related to patents as was the case for Bayer. Section 84 of the Indian laws read above ought to be investigated to establish whether it is in tandem with the WTO TRIPS provisions. The existing provisions may be inadequate.
The following entails some of the relevant WTO TRIPS provisions worth discussing at this point. It is crucial to mention that the provisions are related to the aspect of patents’ rights and intellectual property. By comparing the Indian and WTO TRIPS patent rights provisions, it is possible to come up with a fair conclusion regarding the compulsory license granted to Nexavar.
TRIPS agreement emphasizes the enforcement of laws and regulations regarding patent rights. Other provisions include terms of protection, revocation, unauthorized use, exceptions to patent rights, disclosure requirements, the scope of patent rights, and the criteria used for patentability as well as patentable subject matter.
Article 27 of the TRIPS provision prohibits all acts that are inclined towards discrimination. This article assures the fair availability of patents when it comes to the enjoyment of rights provided by the patents. The article emphasizes that discrimination must not be exercised at all costs. In light of these legal provisions, the article points out three key considerations. They include locally produced items or those imported, the technological field, and the place where the invention took place.
Article 31 of the TRIPS agreement is keen on unauthorized use. The article points out and highlights the reasons why compulsory licenses may be granted by a state. They comprise conditions and guidelines to be followed by governments before considering issuing involuntary licenses. The conditions are meant to protect the patent rights of the owner of a product. There are instances when state governments may unjustifiably abrogate such rights. Also, article 31 clearly states that all the terms and conditions must be followed by officers who grant a compulsory license.
It is also crucial to explore the key features of Article 31 as contained in the WTO TRIPS agreement. To begin with, all the applications made to the control board that deals with patents ought to be individually considered as stated in 31(a). Second, reasonable efforts by the proposed user are necessary when it comes to the process of acquiring authorization. This implies that the user should be knowledgeable enough regarding the terms and conditions to be used. The terms must be of a commercial nature and well thought out. Additionally, the individual case presented is supposed to occur within a reasonable length of time.
Hence, a well-documented period of time is crucial before such applications can be presented to the patents control board. Section 31 (c) states that the stipulated laws are expected to govern both purpose and scope. In section 31(d & e), the WTO TRIPS agreement notes that the applications must be non-assignable and non-exclusive. Unauthorized use also highlights the need of a product to benefit the local market first. Hence, the benefits of a patent should be first enjoyed locally even when it comes to the pricing of products.
However, the TRIPS agreement allows forthwith termination of patents rights if the original purpose of issuing it no longer exists or the perceived benefits are likely to be missed out on continually. The article also emphasizes that adequate remuneration ought to be part of the benefits to be enjoyed. It is a requirement to review all decisions that touch on matters related to unauthorized use.
The decision made by India to issue a compulsory license to Bayer bears several implications. The patent controller in India argued that Nexavar failed to meet the basic threshold in the Indian market. In other words, reasonable public needs were not met by the patented drug. The controller also observed that the price of the drug was too high.
The Canadian case elicits yet another point of legal perspective regarding the TRIPS agreement. The Canadian panel reported on safeguarding pharmaceutical products and observed that article 27 of the TRIPS agreement demands all the exclusions of article 30 be adhered to. The panel argued that the place of production, the technology used, and discrimination are the only exclusive limitations pointed out in article 27. Therefore, it implies that specific challenges that may be encountered in certain product areas cannot be addressed by the concerned control boards. Bonafide exceptions are not prohibited in article 27. When deliberating on the issue of discrimination, it means differential disadvantageous treatment and therefore it is a pejorative and normative term.
The TRIPS agreement also contains three key features that are worth considering in light of the compulsory issuance of licenses. The most important feature is the standard being used, especially when executing a fair trial in intellectual property disputes. Each member is supposed to offer basic standards of protection as stated in the agreement. For example, specific rights are supposed to have permissible exceptions. Conferring of rights must also be made clear. Moreover, the subject matter to be safeguarded ought to be well known.
Enforcement is the second feature of the TRIPS agreement. Intellectual property rights must be enforced using well laid down procedures at the local level. Several general principles have been laid down by the agreement. Hence, all IPR enforcement processes should follow established guidelines. The last crucial feature of the TRIPS agreement is dispute settlement. All the obligations of TRIPS ought to be respected when undertaking the processes of settling disputes.
Going through the Paris Convention under article 5(a), a few crucial legal implications of patent rights stand out. For instance, if the patentee decides to import in a country where patent rights were issued earlier, the patent cannot be forfeited at all. Legislative measures may also be taken by any country that belongs to the union on matters regarding the issuance of compulsory licenses.
The latter may be triggered by several factors, such as failure to work as stipulated in the patent. Section 5(3) of the Paris Convention notes that if there are any significant abuses by the patent holder, the patent can be forfeited, followed by mandatory issuance of the license. Before two years expire after the initial granting of patent rights, patent rights cannot be revoked. Forfeiture proceedings cannot be initiated either (Seckelmann 51). Insufficient working or failure to work cannot be used as benchmarks for granting compulsory licenses before the legally stipulated period expires (three years).
TRIPS and the Paris Convention display several similarities that cannot be ignored. For example, Intellectual Property Conventions are covered in Article 2. Members are supposed to adhere to all of the first 12 articles as well as the nineteenth article as contained in the Paris Convention. There is also an emphasis on the need to avoid derogating from the laid down rules and regulations as documented in the earlier conventions held by TRIPS. Respect for integrated circuits is necessary.
Key findings are evident in India’s compulsory issuance of the license. First, only about 2 percent of the targeted patients were reached by Nexavar, according to the Controller. However, the Controller ignored some crucial points of consideration. The market was actively supplied by the alleged infringer. Moreover, eligible patients also had the option of buying substitute medicines from the Indian market, and so Bayer was not operating as a monopoly. At the point of granting the compulsory license to Nexavar, it has a very limited role. The drug was also subjected to innumerable market conditions.
The decision made by India to issue a compulsory license leads to the second most crucial finding. Nexavar was not affordable to most of the eligible patients in India. According to the controller, buying the drug at slightly above $5,000 per month per patient was not economically justifiable.
The third finding was that the working requirement required local production. The controller argued that since Nexavar was not manufactured in India, the patent held by Bayer was used in overseas production (Seckelmann 44). Therefore, it contradicted the local legal requirements. The mandatory working requirement cannot be satisfied when the drug is imported from overseas facilities. Therefore, manufacturing the drug outside India whereas the patent was issued in India contravenes the local legal provisions according to the government Controller.
Terms and conditions for the compulsory license also exist in India. Natco is supposed to sell its generic drugs for less than $176. This refers to the supply for a whole month for an eligible patient. Additionally, Bayer receives a 6 percent royalty from Natco. The patient term that remains is equal to the length of time that the license will remain valid.
Hence, regarding analyzing the decision taken by the Controller to issue a compulsory license, it is evident that the TRIPS agreement was violated to some extent. In particular, article 27 prohibits discrimination of any kind. Hence, the decision violated the anti-discrimination provision. As much as working requirements are allowable, the agreement stipulated by TRIPS safeguards the patentee’s basic rights when it comes to meeting the threshold of a state’s working rules and regulations, especially on aspects such as local manufacture of goods or importation of goods produced outside a country.
It is crucial to state that issuing a compulsory license has its safeguards that ought to be followed. In the Nexavar case, the Controller did not stick to the set of legal provisions. The TRIPS agreement under article 31 clearly states the necessary safeguards (Frankel and Gervais 1210). From a legal perspective, the case-by-case basis is one of the notable violations in the decision taken by the Controller. The Controller was also supposed to negotiate with the patentee in advance before granting the compulsory license. If the reason for granting the compulsory license is no longer evident, the whole procedure can be revoked. That is yet another violation committed by the Controller.
Articles 31 (a) and (b) of the TRIPS agreement also elaborate on the legal provisions of granting the compulsory license. For example, individualized consideration requirements are ignored through the justification of the license and the reasonable pricing trigger. Furthermore, the Indian public is highly likely to argue that the products are costly, bearing in mind that they are covered by patents. Article 31(a) appears to be in tandem with the reasonable pricing need as applied.
A closer look at article 31(b) in the TRIPS agreement reveals there is no evidence that Natco received a license on appropriate terms and conditions within a sound timeframe. Second, the only piece of communication that Bayer received from Natco was the plan to request a license. Article 31(b)’s requirements cannot be satisfied with a mere notification from Natco (Cardwell and Ghazalian 273).
Questions
Therefore, India’s Compulsory License constitutes unlawful discrimination based on the above arguments. Whether a product is imported or manufactured locally, the TRIPS agreement abhors any act of discrimination. It is also vital to mention the fact that the Paris Convention 5(a) permits countries to grant a compulsory license under certain conditions.
Compelling local manufacturers and avoiding working patents in a country solely through importation are not permissible according to the Paris Convention (Jain 36). The rule partially survives the TRIPS agreement because the latter allows a few exceptions when importing goods from outside. For example, if the initial conditions no longer exist, article 3(g) of the agreement highlights that compulsory licenses may be stopped the moment the stipulated conditions are no longer functional.
Article 27’s banning of discrimination in making patent rights “available” and “enjoyable” imply that individuals, groups, and companies have the right to be safeguarded with patent rights. The same rights are supposed to be enjoyable in the sense that the legal provisions can accommodate various concerns while safeguarding their interests. However, granting a CL for lack of local working violates this part of article 27, especially if the appropriate length of time has not been completed. Granting a compulsory license is not anticipated to take place before three years elapse even if there is evidence that it does not work (Cardwell and Ghazalian 270).
Advanced negotiation with the holder of the patent before a mandatory license is granted is a legal requirement. However, the CL can be structured in such a way that the initial laid down agreements contain the clauses for compulsory license and when they can be granted without consultations. The WTO panel ought to assess the cost of operation undergone by the firm, carry out a cost-benefit analysis, and eventually compare their findings with some of the notable past case studies to decide the adequacy of remuneration.
Works Cited
Cardwell, Ryan, and Pascal Ghazalian. “The TRIPS Agreement as a Coercive Threat: Estimating the Effects of Trade Ties on IPR Protection Regimes.” Global Economy Journal 15.2 (2015): 257-275. Print.
Chaves, Gabriela Costa, and Maria Auxiliadora Oliveira. “A Proposal for Measuring the Degree of Public Health-Sensitivity of Patent Legislation in the Context of the WTO TRIPS Agreement.” Bulletin of the World Health Organization 85.1 (2007): 49-56. Print.
Frankel, Susy, and Daniel Gervais. “Plain Packaging and the Interpretation of the TRIPS Agreement.” Vanderbilt Journal of Transnational Law 46.5 (2013): 1149-1214. Print.
Jain, Tarunz. “Compulsory Licenses under Trips and Its Obligations For Member Countries.” ICFAI Journal of Intellectual Property Rights 8.1 (2009): 27-50. Print.
Seckelmann, Margrit. “From The Paris Convention (1883) to the TRIPS Agreement (1994): The History Of The International Patent Agreements As a History Of Propertisation?.” Journal Der Juristischen Zeitgeschichte 14.1 (2013): 38-60. Print.
Trips: Text of the Agreement 1994.
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