Exceptions to Pharmaceutical Patents

The Agreement leaves considerable room for Member States to apply the standards of Article 29, which they may apply in a more stringent manner to promote innovation and competition. In addition, Member States are free to decide how far the information obligation on the applicant will extend, if the invention consists of several parts for which a patent is sought. Furthermore, Member States may require a written description of the invention, and determine how the description is to be assessed in relation to the patent application and the method for examining the merits of the patent application.

2.2.4 Exceptions to the granting of pharmaceutical patents

Article 5A of the Paris Convention, as part of the TRIPS Agreement, provides that each WTO member has the right to adopt legal measures providing for compulsory licensing to prevent abuses that may lead to the establishment of monopolies. This is echoed in Articles 30 and 31 of the TRIPS Agreement, which specify certain circumstances under which a country may grant compulsory licensing in the public interest. Specifically, Article 30 of the TRIPS Agreement allows use without the consent of the patent owner in the following conditional cases:

"Members may provide certain exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking into account the legitimate interests of third parties" [31].

Article 31 of the TRIPS Agreement details a list of procedural requirements for the limitation of exclusive rights, providing a basis for a member country to grant a compulsory license if all of these procedural requirements are met, such as that unauthorized use must be considered on a case-by-case basis, limited in "scope and duration" and subject to review, and that the unauthorized user must have made prior efforts to obtain a license for the patented technology before being allowed to use it without the owner's consent.

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Patent licensing is a government grant of permission to itself or a third party to make a patent without the consent of the patent owner. It is a necessary and important tool.

government to intervene in the market and limit patent rights if the owner abuses this right by refusing to market the invention or offering it for sale at an unusually high price that potential customers cannot afford. For example, Article 69 of Brazil's 1996 Industrial Property Law allows the government to issue a compulsory license if the patent owner fails to produce the patented technology locally within three years of the grant date.

Each country will have its own preferences for applying compulsory licensing. In the United States and Europe, there are many benefits to compulsory licensing of generic biotechnology patents, research tools, and ancillary patents, and compulsory licensing is also a remedy for unfair pricing. For example, in the United States, the National Institutes of Health issues compulsory licenses to facilitate wider dissemination of “research tools” in biotechnology. In developed countries, compulsory licensing is used to obtain lower prices for drugs for AIDS, tropical diseases, various vaccines, and other essential drugs. For example, the Thai government announced in 2006 that it intended to issue compulsory licensing for a patent covering an AIDS drug. The Brazilian government has successfully used the threat of compulsory licensing to persuade pharmaceutical companies to negotiate lower prices for new HIV drugs.

On the other hand, Article 31 of the TRIPS Agreement also provides for the use of compulsory transfers when there are certain important reasons that allow the use without the consent of the owner. The grounds for granting compulsory transfers without prior efforts to transfer are in two cases: when there is an important public interest of the level of "national emergency or other circumstances of extreme urgency", or when compulsory transfers are used to overcome anti-competitive practices such as excessive prices due to market dominance and failure to provide necessary products including medicines at affordable prices.

Normally, in the case of anti-competitive conduct, prior negotiations are not required, but the original manufacturer will receive compensation for the lost profits. However, the 2001 Doha Agreement provides that a country may grant a compulsory transfer of a drug without compensation.

usually in the event of a disease that threatens to cause a health emergency in that country.

Compulsory licensing under the TRIPS Agreement is a complex issue due to legal uncertainties and risks:

- First, Article 31 does not specify whether the “third party” authorized by the government must be a local or foreign producer, or whether a WTO member is obliged to recognize the validity of a foreign compulsory transfer. The right to grant compulsory transfer would be meaningless, especially for developing countries, if it were not granted to a foreign producer.

- Second, under Article 5B of the Paris Convention, shortage of local labor or lack of local industrial production, and commercial use (sale and import of patented products) are clearly provided as grounds for granting compulsory licensing. However, Article 31 of the TRIPS Agreement neither mentions nor excludes the above case. In this case, one can argue that TRIPS allows compulsory licensing due to shortage of local labor.

- Article 31(f) provides that compulsory licensing is issued “primarily for the supply of the domestic market”, but it does not prevent the export of products produced under compulsory licensing. It is therefore possible that domestically produced products under compulsory licensing will end up in third country markets, where they may compete with similar products protected in the third country market.

- For developing countries where local manufacturers are not capable of producing medicines in sufficient quantity and quality under compulsory transfer, the right granted to that country under Article 31 will not be effective in practice unless it has been able to entrust production to a foreign manufacturer.

Although the TRIPS Agreement allows and the laws of developing countries provide for compulsory licensing of patents, the application of this provision in practice is not easy, typically in the field of pharmaceutical patents. In practice, compulsory licenses are often granted to use pharmaceutical patents owned by multinational pharmaceutical companies. However, the limited technological capacity of pharmaceutical enterprises in developing countries makes it difficult to

barriers to the application of compulsory licensing. Governments of developing countries may allow domestic pharmaceutical companies to use pharmaceutical patents of foreign companies that do not have the technological capacity to manufacture them. This fact has led to the creation of the Protocol amending the TRIPS Agreement, which allows the export of products manufactured under compulsory licenses to other countries that also require compulsory licenses but do not have the technological capacity to manufacture the licensed products (subject to certain additional conditions specified in the Protocol).

The following example illustrates the not-so-simple reality of compulsory licensing of pharmaceutical patents in countries today. In March 2012, a decision by the Indian Patent Office drew the attention of patent owners.

owns a worldwide pharmaceutical patent. For the first time in India.

India, a generic drug manufacturer has been granted a compulsory license to manufacture and sell a generic version of a patented drug. Although Bayer, the renowned drug maker, is appealing the decision, it could set a precedent for compulsory licensing in India. The details of the case are as follows.

 Drugs are granted a Patent

Bayer's patent rights in India

Bayer holds exclusive patent rights to Sorafenib compound

Tosylate. Under the brand name Nexavar, Sorafenib is used to treat liver and kidney cancer. The drug is not intended to cure the disease, but to prolong the life of patients with end-stage liver and kidney cancer. Bayer was granted a patent for Nexavar in India in 2008. The price of a monthly dose for Indian patients is about $5,600, equivalent to 3.5 years of the salary of an Indian civil servant at the lowest level. Nexavar sales in India are about 200 doses/month per year, statistics show that at best this amount only meets about 2% of cancer patients' needs. Cipla is an Indian generic drug manufacturer that has been manufacturing and selling Sorafenib in India since mid-2010. Cipla's monthly dose is only $550. Bayer has filed a lawsuit against Cipla for patent infringement.

your rights and the case is pending.

India does not grant patents for medicines until

in 2005 and only began extending patent protection to drugs in 2005 as part of its efforts to join the World Trade Organization (WTO), which included acknowledging the TRIPs Agreement. TRIPs requires WTO members to provide protection for “any invention, whether a product or a process, in all fields of invention.” TRIPs also allows members to enact laws

to combat the abuse of patent monopoly which may involve the application of

Compulsory licensing as a means to avoid the above abuses. The Indian Patent Act has permitted compulsory licensing since 1970.

 The development of the Generic Drug Company's request for a Compulsory License.

Natco Pharma Ltd. is a well-known generic drug company in India. Natco has developed a process for manufacturing the generic drug Sorafenib and has received government approval for mass production. Natco approached Bayer for a voluntary license. However, Bayer refused. Natco then applied for a compulsory license under Section 84 of the Indian Patent Act, which is in force. The grant of a compulsory license under Section 84 to a patented drug is a landmark event in India.

Article 84 sets out the conditions for granting a Compulsory License. According to this Article, the basis for granting a Compulsory License is that the Patent owner fails to do the following:

- Meet the public's "reasonable demand" for patented products

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patent

- Make products accessible at reasonable prices.

- Realize Indian territory.

Work the patented item on

Natco has convinced the authorities that it is eligible to receive a Compulsory License based on each of the above grounds, specifically as follows.

Responding to public demand

Natco argued through figures on the use of Nexavar and the actual need to prove that Bayer had failed to meet the reasonable demands of the people.

India for the drug, especially because of its high price. The authority agreed with this reasoning. Taking into account the strong sales of the drug outside India and the well-established sales force of Bayer in India, the authority found that Bayer could not justify the non-availability of Nexavar to the Indian public.

The authority also rejected Bayer’s argument that the supply of generic drugs produced by Cipla should be taken into account in determining whether Bayer is meeting public demand. The authority emphasized Bayer’s “two-faced” nature, on the one hand suing Cipla for infringement of its rights, and on the other hand using Cipla’s drug production to avoid compulsory licensing.

Affordable

Natco and Bayer disagreed sharply on the issue of fair prices. Natco argued that the term “fair price” applied primarily to the consumer public. Bayer argued that the concept should apply equally to manufacturers, and that the price should cover both successful and unsuccessful research and development efforts up to the point where the drugs are actually sold on the market.

Bayer also complained that compulsory licensing would hurt it by allowing rich Indians to buy drugs at prices that were reserved for the poor. However, Bayer could not explain why it did not adopt its own tiered pricing scheme.

Ultimately, the Authority found that “reasonable price” must be understood with reference to the general public. Bayer could not deny the evidence that Nexavar’s price put the drug beyond the reach of a large majority of Indian cancer patients.

Made in India

Article 84 does not define what the term “made in India” means. Natco claims that “made” means “manufactured”. Bayer counter-claims that the omission of the term “manufactured” from another Article of the Patent Act means that the above term cannot be interpreted to mean that the drug must be manufactured in India.

In interpreting the language of Section 84, the Authority relied on various international treaties before concluding that the term “made” meant manufacturing. The Authority rejected Bayer’s argument that the term “made” could include use of the imported product for sale in commerce in India. As a result, the Authority retained its view that

The idea is to avoid compulsory licensing by forcing the Patent owner to produce

manufacture the product in India or license it to others for manufacture.

 Terms of Compulsory Licensing

In conclusion, Natco has proved the necessary requirements set out in Article 84. The Authority has granted the Company a Compulsory License. Under the terms of the license, Natco must sell the drug at a price of USD 160 per dose per month, and must also provide it free of charge to 600 patients per year. Natco must pay a 6% royalty to Bayer and must not sell the drug outside India, nor grant any sublicenses.

Opinions have been divided on the long-term impact of the compulsory licensing granted to Natco – especially since the case could change as it is still being litigated. The World Health Organization (WHO) has welcomed the broader access to medicines that the Indian regulator’s decision will bring. Pharmaceutical and biotech companies, meanwhile, are concerned about the side effects that compulsory licensing could have on research and development, arguing that compulsory licensing of pharmaceuticals should be strictly limited to situations such as national health crises or drug prices that are simply unaffordable. Ultimately, only time will tell whether Natco v. Bayer will end up as an isolated case limited to the specific circumstances of a single pharmaceutical market – or whether this is just the first in a series of cases that will prompt developing countries to use Compulsory Licensing to make an overpriced drug accessible to their populations [74].

The second example, applied in Vietnam, shows that the granting of compulsory licensing of pharmaceutical patents is not simple in practice: Tamiflu (Oseltarmivir Phosphate) is a pharmaceutical product that has been granted a patent in a number of countries and is used for the treatment and prevention of certain types of influenza in many countries.

including Vietnam. The patent owner is Gilead Sciences, but F. Hoffman - La Roche (a Swiss pharmaceutical company) has the exclusive right to manufacture and sell Tamiflu worldwide under a contract signed with the patent owner.

On December 26, 2003, the first case of influenza A (Avian influenza) was detected in Vietnam and then the epidemic developed rapidly and spread not only in Vietnam but also in many countries and regions around the world, especially in East and Southeast Asia. In Vietnam alone, from the time the first case of influenza A was detected to November 30, 2005, Vietnamese authorities recorded 3 outbreaks with 91 cases of the disease, including 42 deaths in 32 provinces/cities. According to WHO's warning, if an influenza epidemic occurs, about 10% of Vietnam's population will be affected and 1% of them will die from this disease. Therefore, Vietnam will need a large amount of Tamiflu. However, La Roche has not been able to meet this demand.

On October 26, 2005, the Drug Administration of Vietnam submitted four proposals to the Minister of Health, including the content that the Drug Administration of Vietnam negotiates the rights with F. Hoffmann La Roche Ltd to immediately implement the plan to produce Tamiflu franchised or forced to produce Tamiflu franchised in Vietnam. The very next day, October 27, 2005, the above proposals were basically agreed by the Minister of Health. However, the negotiation process between the Drug Administration of Vietnam and La Roche for La Roche to transfer the rights to produce the drug to Vietnam was unsuccessful. The Vietnamese Ministry of Health plans to issue a BBCGQSDSC decision forcing La Roche to transfer the rights to use the patent to produce Tamiflu. The Vietnamese side affirmed that if Roche does not grant a license to Vietnam to produce the drug, in the event of a declaration of a national emergency, Vietnam can produce the drug without Roche's consent.

In this case, the Vietnamese Government has sufficient legal and practical basis to issue the decision on BBCGQSDCS. Because:

First, in fact, Vietnam has a huge demand for Tamiflu to deal with the bird flu epidemic. Director of the Drug Administration Cao Minh Quang affirmed that "Vietnam is facing a serious risk of Tamiflu shortage if the pandemic

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