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Compulsory Licenses in Foreign Countries—a Fluke or a Canary?

On March 9, 2012, the Indian Controller of Patents granted the first compulsory license to an Indian company to manufacture a patented drug. The decision could have wide-ranging implications for pharmaceutical companies holding patents in India, as well as in other countries throughout the world.

In reaching its decision, the Controller of Patents interpreted the compulsory license provision of the Indian Patent Act. The Indian Patent Act allows a compulsory license when the public need for the patented item is not being met because the patentee will not offer a license on “reasonable terms,” or if the invention is not “being worked” in India. The controller held that the reasonableness of the price for a drug primarily depends on whether members of the Indian public can afford to buy it, and not on the price needed to recoup research and development costs. The Controller also found that the drug was not “being worked” in India because Bayer was not manufacturing it in India despite having plants within the country. It is not known if this is a one-off occurrence or if it may be the beginning of a trend in India and elsewhere in the world. The decision may force pharmaceutical manufacturers to license patents covering certain drugs at lower prices so as to avoid a compulsory license, and may give manufacturers pause when considering the establishment of manufacturing facilities within a country.

To read the full opinion of the Indian Controller of Patents, click here.

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