Business Laws

The dilemma of licensing in a pandemic

M Ramesh | Updated on May 16, 2021

India urgently needs Covid-19 vaccines and the manufacturing capacity of Serum Institute of India and Bharath Biotech is not enough   -  GreenApple78

If India issues compulsory licences saying it is entitled to do so, it should expect retaliation from abroad

When he was being excoriated in the Parliament for industrial delicensing, Prime Minister PV Narasimha Rao invoked an old Sanskrit saying, which has now become inextricably pinned to him: Sarvanase Samutpanne, Ardham Tyajati Panditaha – which means, when faced with complete ruin, the wise man sacrifices half to save the rest.

India is today caught in a dilemma. The country urgently needs Covid-19 vaccines and the current manufacturing capacity with the two companies, Serum Institute of India (Covishield) and Bharat Biotech (Covaxin), is not enough. One way out is that the home-made Covaxin can be got manufactured by other companies also.

After an unexplained delay, the government has shortlisted three public sector companies—Haffkine Corporation under the government of Maharashtra, Indian Immunologicals Ltd, Hyderabad, of the National Dairy Development Board, and Bharat Immunologicals and Biologicals, under the Department of Biotechnology.

As these companies navigate through the red tape and get down to business, India stands opposite to a dilemma: whether to issue compulsory licences to Indian companies for the manufacture of foreign vaccines or cadge a waiver. The government seems to be taking the latter alternative. The US is seen relenting; Europe is disinclined.

TRIPS agreement

Legally, there are provisions under the TRIPS agreement that thegovernment can invoke and force foreign vaccines to be produced by Indian companies here. Justice Chandrachud of the Supreme Court has noted in a recent order that “even as TRIPS obliges countries to ensure a minimum level of patent protection, it creates a permissive regime for the carving out of exceptions and limitations that further public health objectives.”

An Indian company can apply for a compulsory licence under Section 84 of the TRIPs-compliant Indian Patents Act; the Controller of Patents can issue a compulsory licence under Section 92 of the Act.

Under Section 84, a company can be given compulsory licence if it is able to show one of the three circumstances exists: i) reasonable requirement of the public with regard to the patented invention not being satisfied, or ii) that the patented invention is not available to the public at the reasonably affordable price; or iii) that the patented invention is not worked in the territory of India.

The government can alternatively acquire the patents under Section 102 from the patentees; it can revoke the patent in public interest, under Section 66.

Any discussion about compulsory licensing for a drug invokes memories of the first case after India signed the Doha Declaration—the famous case of Bayer Vs Natco & Government of India. Natco wanted to manufacture Bayer’s cancer drug Sorafenib Tosylate in India. It asked for a compulsory licence citing all the three conditions under Section 84 – and got it.

Later, a Tribunal disagreed that the third circumstance, i.e., the patent not being worked in India, existed. But still Natco got its way by showing that it could produce 120 tablets (a month’s treatment) for ₹8,800, against Bayer’s price of ₹2,80,482. The Controller of Patents fixed a royalty of 6 per cent for Bayer, which the Tribunal raised to 7 per cent. In July 2014, the Bombay High Court sided with the government.

Thus, clear pathways exist for the Indian government to force-manufacture of the much-needed, life-saving vaccines in India. However, it has taken the cautious and round-about route of asking for waivers.

Why? Because if India issues compulsory licenses saying it is entitled to do so, it should expect horrendous retaliation from abroad. If it is a US company, with Biden being not particularly a friend of India unlike his predecessor, there could be sanctions. The government’s apprehensions on this count have been articulated in its recent affidavit to the Supreme Court – it noted that any exercise of statutory powers would have “serious, severe and unintended adverse consequences.”

The way forward

So, what should the government do – flex its muscles or fold its hands? The predominant view in the country seems to be veering around the former, especially if the latter doesn’t help. Go ahead and issue compulsory licences and leave it to the diplomats to handle the consequences—after all, saving lives is more important.

Sakshi Pawar, a legal expert with Vidhi Centre for Legal Policy, a think-tank, notes: “With compulsory licensing now being discussed widely as an alternative to the TRIPS Agreement waiver, the Central government and the Controller must seriously consider them as an option to address the problem of access to medicines and treatment of Covid-19 in India.”

That would be the equivalent of the wise man sacrificing half to save the rest.

Published on May 16, 2021

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