Patent law gives inventors and patent holders exclusive rights over their inventions. However, patent rights in India are not absolute.
In certain circumstances, Indian patent law allows a third party to use a patented invention without the voluntary consent of the patent holder. This legal mechanism is known as compulsory licensing.
Compulsory licensing is designed to balance patent protection, innovation and public interest, particularly where a patented invention is not adequately available to the public, is not reasonably affordable, or has not been sufficiently worked in India.
One of the most important examples of compulsory licensing in India is the Natco Pharma Ltd. v. Bayer Corporation dispute concerning the cancer drug Nexavar.
This article explains compulsory licensing in India, the relevant provisions of the Patents Act, 1970, the requirements under Section 84, the Bayer-Natco case, government use of patents, and the relationship between Indian patent law and the TRIPS Agreement.
What Is Compulsory Licensing?
A compulsory licence is a statutory authorisation that permits a person or entity to use or exploit a patented invention without obtaining a voluntary licence from the patent holder.
The patent itself is not cancelled.
Instead, the patent continues to remain in force while the authorised person receives a legal right to exploit the patented invention subject to the terms and conditions imposed under the law.
The principal provisions relating to compulsory licensing are contained in Sections 84 to 92 of the Patents Act, 1970.
In simple terms:
Patent remains valid + statutory conditions are satisfied + third party receives permission to use the invention = Compulsory Licence.
Why Does India Allow Compulsory Licensing?
Patent protection is intended to encourage innovation by granting inventors exclusive rights for a limited period.
At the same time, patent law recognises that inventions can have significant social and economic importance.
A patented invention may involve:
- Life-saving medicines;
- Medical technologies;
- Essential technologies;
- Industrial products;
- Public-health-related inventions; or
- Other inventions with substantial public importance.
If an invention is patented but is not sufficiently available to the public, the law provides mechanisms through which the public interest can potentially be protected.
Therefore, compulsory licensing seeks to maintain a balance between:
Private Patent Rights ↔ Public Interest
Section 84 of the Patents Act: When Can a Compulsory Licence Be Granted?
Section 84 of the Patents Act, 1970 is the principal provision dealing with applications for compulsory licences.
A person interested may apply for a compulsory licence after the expiry of three years from the grant of the patent, subject to the statutory requirements.
The applicant must establish the relevant statutory grounds.
Broadly, a compulsory licence may be considered where:
- The reasonable requirements of the public have not been satisfied;
- The patented invention is not available to the public at a reasonably affordable price; or
- The patented invention has not been worked in the territory of India.
These conditions are central to understanding compulsory licensing under Indian patent law.
What Does “Reasonably Affordable Price” Mean?
The Patents Act does not simply ask whether a patented product has a high price in absolute terms.
The relevant question is whether the patented invention is available to the public at a reasonably affordable price, taking into account the circumstances contemplated by the statute.
This issue can become particularly significant in the pharmaceutical sector.
For example, where a patented medicine is important for treating a serious disease but its price makes it inaccessible to a substantial section of the population, the affordability requirement may become relevant to a compulsory-licensing application.
The objective is not simply to penalise a patent holder for charging a particular price.
Rather, the statutory framework requires consideration of public access, affordability and the circumstances surrounding the patented invention.
What Does “Working of a Patent in India” Mean?
Another important ground under Section 84 concerns whether the patented invention has been worked in the territory of India.
The concept of working is relevant because patent law is not concerned only with granting exclusive rights.
It also considers whether the patented invention is being sufficiently exploited or made available in the Indian market in accordance with the statutory framework.
Whether a patent has been adequately worked is a fact-specific legal question and can depend upon the nature of the invention, market circumstances, availability, manufacturing arrangements and other relevant evidence.
Bayer-Natco Compulsory Licensing Case
One of the most significant compulsory licensing cases in India is:
Natco Pharma Ltd. v. Bayer Corporation
The dispute concerned Bayer’s patented cancer medicine sorafenib tosylate, marketed under the brand name Nexavar.
Natco Pharma applied for a compulsory licence under Section 84 of the Patents Act, 1970.
The Controller ultimately granted the compulsory licence, and the matter was subsequently considered in appellate and judicial proceedings.
The case became a major reference point in Indian patent law because the authorities examined the statutory requirements concerning:
- Reasonable requirements of the public;
- Reasonably affordable pricing; and
- Working of the patented invention in India.
Why Is the Bayer-Natco Case Important?
The Bayer-Natco dispute demonstrated that compulsory licensing is not merely a theoretical provision in the Patents Act.
The case showed how Section 84 could operate in practice when an applicant alleged that the statutory requirements for access to a patented invention had not been satisfied.
The case also attracted considerable attention because it involved a patented pharmaceutical product and raised broader questions concerning:
Patent rights vs. access to essential medicines.
The case continues to be an important reference point when discussing compulsory licensing in India.
What Is Section 90 of the Patents Act?
Where a compulsory licence is granted, Section 90 provides guidance concerning the terms and conditions of the licence.
The Controller may consider various factors, including:
- The nature of the invention;
- The applicant’s ability to work the invention;
- The price of the patented product;
- The need to make the patented invention available to the public;
- Reasonable remuneration to the patent holder; and
- Other statutory considerations.
Therefore, compulsory licensing does not mean that the patent holder automatically loses all economic rights.
The statutory framework seeks to balance:
Public Access + Patent Holder’s Remuneration
Does a Compulsory Licence Cancel the Patent?
No.
This is an important distinction.
A compulsory licence does not ordinarily cancel or invalidate the patent itself.
The patent continues to exist, but another party receives statutory permission to exploit the patented invention under specified conditions.
Therefore:
Patent Cancellation
The patent itself is removed or invalidated.
Compulsory Licensing
The patent remains in force, but another person is legally permitted to use the invention under the terms of the compulsory licence.
These are legally different mechanisms.
Compulsory Licensing vs Patent Invalidation
| Compulsory Licensing | Patent Invalidation |
|---|---|
| Patent generally continues to exist | Patent may be cancelled or held invalid |
| Third party receives authorised use | Patent rights are removed or denied |
| Patent holder may receive remuneration | Consequences depend on the invalidity proceedings |
| Governed by specific statutory conditions | Based on grounds challenging patent validity |
| Focus can include public access | Focuses on validity of the patent |
Understanding this distinction is essential when analysing patent disputes.
Section 92: Compulsory Licensing in Public Emergency
The Patents Act also provides a special mechanism under Section 92 for compulsory licensing in certain circumstances involving:
- National emergency;
- Extreme urgency; or
- Public non-commercial use.
This provision operates differently from the ordinary Section 84 mechanism.
The importance of Section 92 becomes particularly apparent where a public-health crisis or other emergency creates an urgent need for access to a patented invention.
The provision is therefore part of the broader framework through which Indian patent law addresses exceptional public-interest circumstances.
Government Use of Patents Under Indian Law
Compulsory licensing should also be distinguished from government use or government exploitation of patented inventions.
The Patents Act contains separate provisions dealing with government use, including Sections 100 to 102.
These provisions provide mechanisms under which the government may use or acquire rights concerning patented inventions in circumstances recognised by the statute.
Therefore, the following concepts should not be treated as identical:
- Section 84 compulsory licensing;
- Section 92 emergency compulsory licensing; and
- Government use under Sections 100–102.
Each operates within its own statutory framework.
Compulsory Licensing and International Patent Law
India’s compulsory licensing framework also operates within the international intellectual-property system.
The TRIPS Agreement, particularly Article 31, permits WTO member countries to authorise the use of patented inventions without the authorisation of the patent holder, subject to specified conditions.
This is an important principle because international patent law recognises that patent protection can coexist with legitimate public-interest measures.
Doha Declaration on TRIPS and Public Health
The Doha Declaration on the TRIPS Agreement and Public Health, adopted in 2001, further addressed the relationship between intellectual property rights and public health.
The Declaration affirmed the ability of WTO members to take measures to protect public health and promote access to medicines while implementing their obligations under the TRIPS framework.
This international context is particularly relevant when discussing compulsory licensing of pharmaceutical patents.
Is Compulsory Licensing Against Patent Rights?
Not necessarily.
Compulsory licensing does not eliminate the patent system or automatically remove the rights of patent holders.
Instead, it operates as a statutory exception to exclusive patent rights in circumstances specifically recognised by law.
A compulsory licence is not automatically granted merely because:
- A product is expensive;
- A person wants to use the invention;
- The patent is commercially successful; or
- There is public demand.
The applicant must satisfy the applicable statutory requirements and the competent authority must consider the relevant circumstances.
What Are the Key Requirements for Compulsory Licensing in India?
For an ordinary application under Section 84, the following points are particularly important:
1. Three-Year Requirement
The application generally becomes available after three years from the grant of the patent.
2. Applicant Must Be a Person Interested
The applicant must fall within the statutory framework governing who can apply.
3. Statutory Ground Must Be Established
The applicant must establish one or more of the relevant grounds under Section 84.
4. Evidence Is Important
The applicant should support the allegations concerning availability, affordability, public requirements or working of the patent with appropriate evidence.
5. Terms of Licence Matter
If a licence is granted, the Controller may impose appropriate terms and conditions under the statutory framework.
Compulsory Licensing in Pharmaceutical Patents
Compulsory licensing is particularly important in discussions concerning pharmaceutical patents and access to medicines.
A patented medicine may involve substantial research and development expenditure. At the same time, medicines can be essential to public health.
This creates a complex legal and policy balance between:
Innovation + Investment + Patent Protection
and
Affordability + Availability + Public Health
The Indian compulsory licensing framework attempts to address this balance through statutory requirements rather than treating either patent rights or public access as absolute.
Conclusion: Understanding the Balance Between Patent Rights and Public Interest
Compulsory licensing in India represents an important limitation on patent exclusivity.
The patent system provides inventors with exclusive rights to encourage research, development and innovation. At the same time, the Patents Act recognises that those exclusive rights operate within a broader social and economic framework.
Sections 84 to 92 of the Patents Act, 1970 provide mechanisms for compulsory licensing in specified circumstances, while Sections 100 to 102 address separate aspects of government use.
The Bayer-Natco case demonstrates the practical significance of these provisions and remains an important reference when studying compulsory licensing and pharmaceutical patents in India.
Ultimately, compulsory licensing seeks to address a fundamental question:
How can patent law protect innovation while ensuring that important inventions remain accessible to society when the statutory conditions for intervention are satisfied?
Understanding this balance is essential for patent owners, pharmaceutical companies, inventors, startups, researchers and businesses dealing with intellectual property rights in India.