Compulsory licensing under The Patents Act, 1970 represents one of the most carefully calibrated intersections between private intellectual property rights and the constitutional commitment to public welfare. The Act makes it clear that patents are not granted as absolute monopolies insulated from social accountability. Instead, they are conditional statutory privileges, conferred subject to compliance with obligations that ensure the invention serves the public interest. The compulsory licensing framework mainly embodied in Sections 84, 85, 90, 92 and 92A-operates as a doctrinal safety valve. It ensures that exclusivity does not ossify into inaccessibility, particularly in sectors such as pharmaceuticals where the consequences of exclusion are measured not merely in economic terms but in human life and health.
The legislative philosophy behind compulsory licensing in India cannot be understood without recalling the structural evolution of Indian patent law. The Patents Act, 1970 was enacted following the recommendations of the Ayyangar Committee, which emphasized that patent protection must not become an instrument of economic exploitation. Although the 2005 amendments introduced product patents in pharmaceuticals to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Parliament retained and reaffirmed compulsory licensing as a core public interest mechanism. The continued presence of Sections 84–92A in the post-TRIPS regime reflects a deliberate legislative choice: exclusivity is recognised, but only insofar as it remains compatible with access, affordability and technological dissemination.
Section 84 – Grounds for Compulsory Licensing
Section 84 is the cornerstone of the compulsory licensing framework. It permits “any person interested” to apply for a compulsory licence after the expiry of three years from the date of grant of a patent. The three-year waiting period itself is revealing. It signals that Parliament intended to grant patentees a reasonable opportunity to exploit their inventions before subjecting them to compulsory intervention. At the same time, the provision ensures that prolonged inaction or exploitative pricing cannot be shielded behind formal patent validity. The grounds under Section 84(1) are threefold firstly that the reasonable requirements of the public have not been satisfied secondly that the patented invention is not available to the public at a reasonably affordable price and lastly that the invention is not worked in the territory of India. These grounds are disjunctive. The establishment of any one is sufficient.
Reasonable Requirements of the Public – Section 84(7)
The phrase “reasonable requirements of the public” is further elaborated in Section 84(7), which sets out circumstances in which such requirements shall be deemed not to have been satisfied. These include, inter alia, refusal to grant licences on reasonable terms, failure to meet demand on reasonable terms, restrictive trade practices and non-working of the invention in India. The statutory language is intentionally capacious. It does not confine the inquiry to mere quantitative supply; it invites examination of whether the patentee’s conduct has, in substance, impeded access. In pharmaceutical contexts, this necessarily entails assessment of disease prevalence, availability of therapeutic substitutes, scale of importation or manufacture and distribution patterns. The provision thus institutionalises a public-centric perspective. Patent rights are assessed not solely in terms of formal compliance but in relation to their functional impact on the population.
Reasonably Affordable Price – The Bayer v. Natco Standard
The second ground under Section 84-availability at a “reasonably affordable price”-introduces a normative economic standard. The Act does not define affordability. This omission is deliberate; affordability cannot be reduced to a universal numerical threshold. It must be evaluated in light of socio-economic conditions. Judicial exposition of this standard occurred in the landmark decision of the Bombay High Court in Bayer Corporation v. Natco Pharma Ltd. In that case, the Controller of Patents granted a compulsory licence in respect of Sorafenib Tosylate, marketed by Bayer as Nexavar, a drug used in the treatment of renal and hepatocellular carcinoma. The Controller found that the price at which the drug was marketed-approximately INR 2.8 lakhs per month-placed it beyond the reach of the vast majority of Indian patients. The Bombay High Court upheld the grant of the compulsory licence, affirming that affordability must be assessed from the standpoint of the public and not solely from the patentee’s perspective of recouping investment. The Court declined to accept that availability to a small fraction of patients satisfied statutory requirements. In doing so, it articulated a pricing jurisprudence grounded in distributive justice. While the Court refrained from laying down a rigid formula, the reasoning underscores that the statutory standard incorporates socio-economic realities.
Working of the Invention in India
The third ground under Section 84 concerns whether the invention is “worked in the territory of India.” The meaning of “working” has generated considerable doctrinal debate. Patentees have argued that importation constitutes working, particularly in a globalised economy where manufacturing may be geographically dispersed. In Bayer, the Controller and the High Court examined whether the limited quantities imported by Bayer met domestic demand. The Court did not hold that importation can never amount to working. Instead, it adopted a contextual approach. Where importation is minimal relative to demand and where local manufacture is feasible, non-working may be inferred. The Court’s reasoning reflects a developmental dimension: the patent system is not merely about access but also about fostering domestic industrial capability. However, the decision stops short of imposing an absolute localisation mandate. The inquiry remains fact-specific and subject to judicial interpretation.
Procedure – Prior Negotiation and the Controller’s Inquiry
Section 84 is complemented by procedural safeguards. An applicant must ordinarily demonstrate efforts to obtain a voluntary licence on reasonable terms, as required under Section 84(6)(iv), unless such efforts are excused. This aligns with Article 31(b) of TRIPS, which requires prior negotiation except in cases of national emergency or extreme urgency. The Controller must consider factors such as the nature of the invention, the time elapsed since grant, measures taken by the patentee to work the invention and the applicant’s capacity to exploit it to public advantage. Compulsory licensing is therefore not automatic; it is the outcome of a structured adjudicatory process.
Terms of Compulsory Licences – Section 90 and Royalty Determination
Section 90 governs the terms and conditions of compulsory licences. It mandates that licences be non-exclusive and non-assignable and that they be granted predominantly for the supply of the Indian market. It also requires that the patentee receive reasonable remuneration, taking into account the nature of the invention and the expenditure incurred in its development. In Bayer, the Controller initially fixed royalty at 6% of net sales, subsequently enhanced to 7% by the Intellectual Property Appellate Board. The royalty determination drew upon international guidelines and comparative benchmarks. This demonstrates that compulsory licensing is not expropriation; it is regulated access accompanied by compensation. Section 90 thereby mirrors the safeguards contemplated in TRIPS Article 31(h).
Revocation for Non-Working – Section 85
Section 85 introduces a more stringent consequence than compulsory licensing alone. It provides that where, after the grant of a compulsory licence, the Controller is satisfied at any time that the patentee has not complied with the terms of the licence or that the grounds which led to the grant of the compulsory licence continue to exist and are unlikely to cease in the foreseeable future, the Controller may, on the application of the Central Government or any person, order revocation of the patent.
The practical trigger for Section 85 is persistence of failure. If a compulsory licence is granted under Section 84 and the patentee still does not take steps to make the invention available at affordable prices or work it in India, the entire patent may be revoked – not merely subjected to a further licence. This represents the most severe sanction within the administrative patent system short of judicial revocation under Section 64.
Although Section 85 has not been invoked in any reported Indian decision, its presence in the statute exerts significant normative pressure. A patentee who ignores the conditions of a compulsory licence does so at the risk of losing the patent entirely. For practitioners advising patentees, this means that compliance with compulsory licence terms – including royalty payment obligations, supply targets and pricing commitments – must be treated as an ongoing compliance obligation and not merely an administrative formality. The structure of Sections 84 and 85 thus reflects an escalating framework of intervention: first monitored access through compulsory licensing, then possible extinction of exclusivity through revocation.
National Emergency and Export – Sections 92 and 92A
Sections 92 and 92A address exceptional and international contexts. Section 92 empowers the Central Government to declare that compulsory licences may be granted in cases of national emergency, extreme urgency or public non-commercial use. In such situations, prior negotiation with the patentee is not required. This provision embodies the flexibility recognised in TRIPS Article 31(b) and reaffirmed in the Doha Declaration on TRIPS and Public Health (2001). Section 92A, inserted by the Patents (Amendment) Act, 2005 following the 2003 WTO Decision and the subsequent incorporation of Article 31bis into the TRIPS Agreement, creates a distinct compulsory licensing pathway specifically for export. It permits the Controller to grant a compulsory licence to any person to manufacture and export a patented pharmaceutical product to any country that has insufficient or no manufacturing capacity in the pharmaceutical sector for the relevant product, provided that country has either granted a compulsory licence for importation of that product or, being a least-developed country, has notified the WTO of its intention to import.
The provision operationalises India’s position as the world’s largest supplier of generic medicines to developing and least-developed countries — a role that became particularly visible during the COVID-19 pandemic when access to vaccines and antivirals was a matter of acute global concern. Unlike the domestic compulsory licence regime under Section 84, Section 92A does not require a three-year waiting period from the date of patent grant. It can be invoked as soon as the importing country demonstrates its need and incapacity. The royalty payable to the patentee under a Section 92A licence is determined with reference to the economic value of the use to the importing country, and relevant WTO guidance on remuneration applies. Practitioners advising generic pharmaceutical exporters should note that Section 92A licences are granted for specific importing countries and specific products – each export destination requires a separate application and Controller order.
TRIPS Compatibility
The compatibility of India’s compulsory licensing regime with TRIPS has been widely discussed. TRIPS does not prescribe an exhaustive list of grounds for compulsory licensing; it leaves Members free to determine the bases upon which such licences are granted, subject to procedural safeguards. India’s framework satisfies the core requirements of Article 31: individual merits review, prior negotiation (except in emergencies), adequate remuneration and judicial review. There has been no adverse WTO ruling against India’s compulsory licensing provisions. The regime therefore represents a lawful exercise of treaty flexibility.
Comparative Perspective
A brief comparative perspective highlights the distinctive features of the Indian approach. In the United States, there is no broad compulsory licensing mechanism equivalent to Section 84. Government use of patents is authorised under 28 U.S.C. § 1498, which allows use with payment of compensation and compulsory licensing may arise through antitrust settlements. The American system relies more heavily on market forces and competition law. The United Kingdom, under the Patents Act 1977, provides for compulsory licences after three years from grant, particularly where demand is unmet or licensing is unreasonably refused. However, such licences have been sparingly granted. India’s regime, while procedurally similar to the UK model, has demonstrated operational willingness to intervene in appropriate circumstances, as evidenced by Bayer.
Litigation and Prosecution Implications
From a litigation and prosecution standpoint, compulsory licensing proceedings are evidence-intensive. Working statements filed under Section 146 read with Rule 131 (Form 27) assume strategic importance, as they disclose whether and to what extent the patent is being worked in India. Pricing data, demand analysis and evidence of voluntary licensing negotiations are central to adjudication. For patentees, proactive licensing strategies, transparent pricing justifications and demonstrable efforts toward supply can mitigate the risk of compulsory licensing. For generic applicants, detailed market studies and technical capacity assessments strengthen applications under Section 84.
Recent Developments and COVID-19 Context
Recent policy discourse, particularly during the COVID-19 pandemic, revived attention to compulsory licensing as a potential tool for ensuring access to vaccines and therapeutics. Although India did not issue large-scale compulsory licences during that period, the debate reaffirmed the continuing relevance of Sections 84 and 92. Amendments to the Patent Rules in 2020 streamlined Form 27 requirements, reflecting administrative modernisation rather than substantive dilution of working obligations.
Conclusion
TThe jurisprudence of compulsory licensing in India rests on a single major precedent – Bayer Corporation v. Natco Pharma – but the doctrinal architecture constructed around it is durable. The decision established that affordability is assessed from the standpoint of the public rather than the patentee, that working obligations are substantive and not satisfied by token imports, and that compulsory licensing is a legitimate statutory remedy rather than an exceptional measure of last resort. These principles apply equally to any future application across any technology sector.
Looking forward, the compulsory licensing framework will face new tests as patent disputes arise in biologics, climate technologies, artificial intelligence-enabled diagnostics and digital therapeutics. The question of whether Section 84’s working requirement can be satisfied by cloud-delivered or software-based inventions, and how “reasonably affordable price” applies to high-cost biologics with complex manufacturing profiles, remain unresolved. These are not hypothetical concerns – they are the next generation of access disputes that Indian courts and the Controller will be asked to address.
For practitioners, the practical lesson is clear. Patentees operating in sectors where public access is a live concern must treat working obligations, pricing transparency and voluntary licensing strategy as core elements of patent portfolio management – not afterthoughts. A patent that is legally valid but commercially inaccessible is a patent at structural risk under Sections 84 and 85. The Indian compulsory licensing regime does not punish innovation. It conditions the monopoly that rewards innovation on a corresponding obligation to serve the public whose legal system protects it.
References
- The Patents Act, 1970 (as amended).
- The Patents Rules, 2003 (as amended).
- Bayer Corporation v. Natco Pharma Ltd..
- Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Articles 7, 8, 31 and 31bis.
- Doha Declaration on the TRIPS Agreement and Public Health, 2001.
- UK Patents Act 1977 (Compulsory Licensing Provisions).
- 28 U.S.C. § 1498 (United States Code).
Compulsory Licensing Copyright Act Copyright Act 1957 Copyright Enforcement Copyright Infringement Copyright Law Copyright Licensing Copyright Registration Copyright Rules CRI Guidelines Deceptive Similarity Fair Dealing Defence Rejected Goodwill Indian IP Framework Indian Patent Act Indian Patent Law Indian Trademark Law Intellectual Property Law Interim Injunction Inventive Step IP Law India Passing Off Patent Claims Patent Enforcement Patent Examination Patent Infringement Patent law Patent Revocation Patent Rule Pharmaceutical Patents Section 3 Section 11 Section 13 Section 29 The Patent Act 1970 Trademark Dilution Trademark Enforcement Trademark Infringement Trademark Litigation Trademark Registration Trade Marks Act 1999 Trade Marks Rules 2017 TRIPS Agreement TRIPS Compliance Well-Known Trademark