Government Use of Patents Section 99 to 103 Explained

The relationship between sovereign power and private intellectual property rights has been one of the most contested and consequential questions in the design of patent systems since the earliest days of modern patent law. A patent grants its holder a monopoly a right to exclude all others, including the state, from using the patented invention without authorisation. Yet the state, as the custodian of public welfare and the ultimate guarantor of the public interest, cannot be entirely subject to private monopoly in matters that bear on national security, public health or essential public services. Every major patent system in the world has resolved this tension by providing mechanisms through which the government can use patented inventions without the patent holder’s consent, subject to defined conditions and to the payment of adequate compensation. In India, this resolution is effected through Sections 99 to 103 of the Patents Act, 1970 a cluster of provisions that together constitute the statutory framework for government use of patents, a framework whose design reflects India’s characteristic insistence on subordinating patent monopoly to the public interest while ensuring that patent holders receive fair compensation for the use of their rights.

Sections 99 to 103 are not the most frequently invoked provisions of the Patents Act and they have generated less judicial interpretation than the compulsory licensing provisions of Section 84 or the patentability exclusions of Section 3. But their significance is disproportionate to the frequency of their invocation. They represent the ultimate backstop of the Indian patent system the mechanism through which the state can ensure that a patent monopoly does not stand in the way of essential public purposes, from the manufacture of defence equipment to the supply of medicines during a public health emergency. Understanding these provisions their scope, their conditions, their procedures and their relationship with the broader framework of patent limitations in Indian law is essential for patent holders operating in India, for government entities engaged in procurement and R&D and for practitioners advising on the interface between IP rights and public law.

The Legislative Philosophy Behind Government Use Provisions

The government use provisions of the Patents Act, 1970 are rooted in a legislative philosophy that treats patent rights as conditional grants monopolies that are awarded by the state in the public interest and that may be overridden by the state when the public interest so requires. This philosophy is not unique to India it is reflected in Article 31 of the TRIPS Agreement, which expressly permits compulsory licensing for government use without the authorisation of the patent holder, subject to defined conditions including the payment of adequate remuneration. India’s government use provisions represent its implementation of the Article 31 flexibility, tailored to the specific constitutional and administrative context of the Indian state.

The constitutional backdrop to the government use provisions is significant. The Constitution of India, under Article 31A and the Directive Principles of State Policy in Part IV, affirms the state’s power to acquire property for public purposes subject to the payment of compensation. The government use provisions of the Patents Act represent a specific application of this constitutional principle in the context of intellectual property they enable the government to use patented inventions for public purposes without the patent holder’s consent, subject to the obligation to pay adequate remuneration. The interplay between the constitutional property guarantee and the government’s power to override it for public purposes is the legal foundation on which Sections 99 to 103 rest.

Section 99 – Use of Inventions for Purposes of Government

Section 99 of the Patents Act, 1970 is the foundational provision of the government use framework. It provides that a patented invention may be used by the Central Government or a State Government or a government undertaking whether before or after the grant of the patent for the purposes of the government. The scope of this provision is broad in several important respects.

The permission to use a patented invention extends not only to the Central Government but to State Governments and to government undertakings a term defined in Section 99(3) to mean any undertaking carried on by or under the authority of the Central Government or a State Government or by a Government company as defined under the Companies Act. This broad definition of the beneficiary of the government use right reflects the extensive range of entities through which the Indian state conducts its activities from central ministries and departments to state public sector undertakings, from defence establishments to government-owned pharmaceutical manufacturers.

The permission is further extended, by Section 99(2), to a government contractor a private entity authorised by the Central Government or a State Government to produce or supply a patented article or to use a patented process for the purpose of the government. Where a government contractor is authorised to use a patented invention for a government purpose, the contractor has the same right to use the invention as the government itself and the patent holder has the same right to remuneration from the use as it would have against the government. This extension to government contractors is commercially significant: it means that private sector companies engaged in government contracts in defence manufacturing, infrastructure, public health supply or any other government activity may use patented inventions without the patent holder’s consent, provided they are acting pursuant to a government authorisation for a government purpose.

Section 99(1) expressly provides that the government’s power to use a patented invention operates notwithstanding anything contained in any other provision of the Act. This non-obstante clause is of considerable legal significance it means that the government use right overrides the exclusive rights of the patent holder under Section 48 of the Act and cannot be excluded or limited by any contractual provision in a licence agreement or any other arrangement between the patent holder and a third party. The government use right is a statutory entitlement that cannot be contracted away.

The Meaning of “Purposes of Government”

The phrase “purposes of the government” is central to the scope of Section 99 but is not defined in the Act and its interpretation determines how broadly the government use right extends. In its natural meaning, purposes of the government encompasses any activity undertaken for the benefit of the state or the public by or on behalf of a government entity the manufacture of defence equipment and materials, the provision of public health services, the operation of public utilities and infrastructure, the conduct of scientific research by government laboratories and any other activity that serves a legitimate governmental purpose.

The phrase should be contrasted with purely commercial activities conducted by government entities in competition with the private sector. Where a government undertaking manufactures and sells a patented product in a purely commercial context competing with private manufacturers in an open market for commercial customers the activity may not constitute use for the “purposes of government” in the sense intended by Section 99. The government use right is designed to enable the state to fulfil its public functions without being constrained by patent monopolies, not to enable government-owned commercial enterprises to gain a competitive advantage over private sector competitors by free-riding on patented technology.

In practice, the most important contexts for government use of patents in India have been the defence sector where the government has used patented technologies in the manufacture of military equipment and materials and the public health sector where the government has used or threatened to use its Section 99 powers in relation to essential medicines. The public health context is of particular contemporary significance given the frequency with which pharmaceutical patents intersect with government health procurement and the availability of essential medicines under the National Health Mission and similar programmes.

Section 100 – Terms and Conditions of Government Use

Section 100 of the Patents Act sets out the terms and conditions under which the government use right of Section 99 is exercised. Section 100(1) provides that the provisions of any licence granted under the patent shall not apply to the use of the invention by the government or a government contractor. This provision ensures that the government use right cannot be limited or conditioned by the terms of existing licences a licensee’s exclusive licence, for instance, does not prevent the government from using the patented invention under Section 99 and the government’s use does not constitute an infringement of the licensee’s exclusive rights.

Section 100(3) provides that the government or a government contractor authorised under Section 99 shall, before or after the use of the invention, give notice of such use to the patentee as soon as reasonably practicable, unless it appears that it would be contrary to the public interest to do so. This notice requirement imposes a duty of transparency on the government the patent holder must be informed of the use of its invention so that it can assert its right to remuneration and, if necessary, challenge the terms of use. The exception for cases where notice would be contrary to the public interest is principally relevant in defence contexts, where the disclosure of the fact of government use of a particular technology may compromise national security or operational secrecy.

Section 100(4) provides that where any patented invention is used by or for the purposes of the Central Government, the Central Government shall pay to the patentee or other person entitled thereto, remuneration as may be agreed upon between the Central Government and the patentee before or after the use, or, in default of agreement, as may be determined by the High Court. This provision establishes the obligation to pay remuneration as an absolute and non-derogable consequence of government use the government cannot use a patented invention without paying for it and if agreement on the amount of remuneration cannot be reached, the matter is determined by the High Court.

The determination of remuneration by the High Court under Section 100(4) engages principles of fair compensation that require the Court to assess what a reasonable royalty would be for the use of the invention taking account of the nature of the invention, the period and extent of government use, the commercial value of the invention, the investment made by the patentee in developing it and any other relevant factors. The High Court’s jurisdiction to determine remuneration is an important safeguard for patent holders, ensuring that the government’s power to use without consent does not effectively become a power to expropriate without fair compensation.

Section 100(5) provides that where patented inventions are used for the purposes of government by a government undertaking or a government contractor, the terms and conditions of use shall also include the right to use the invention after the expiry of the patent a provision that is somewhat anomalous, since after patent expiry the invention is in the public domain and no authorisation from the patent holder is required. The provision appears designed to address situations where a government use arrangement is established during the patent term and is intended to continue seamlessly into the post-expiry period.

Section 101 – Rights of Third Parties in Respect of Government Use

Section 101 of the Patents Act addresses the rights of third parties persons other than the patent holder who may have an interest in the use of a patented invention by the government. It provides that the use of a patented invention for the purposes of government shall not affect the right of the patentee to any remuneration or compensation to which he may be entitled in respect of such use and shall not affect any right of the patentee to take proceedings for infringement against any person other than the government or a government contractor.

The provision ensures that the government use right which operates without the patent holder’s consent and without its ability to refuse does not inadvertently deprive the patent holder of rights against other parties. Where the government’s use of a patented invention is authorised under Section 99, that authorisation does not extend to private parties who are not government contractors and the patent holder retains its full rights of enforcement against any such private parties who infringe the patent independently of the government use arrangement.

Section 101 also addresses the position of exclusive licensees. Where a patent has been licensed exclusively to a licensee and the government uses the patented invention under Section 99, the exclusive licensee’s rights are not extinguished by the government use the licensee retains its rights against third party infringers and the government’s use does not constitute a breach of the exclusivity of the licence as against the licensee’s right to exclude others.

Section 102 – Acquisition of Inventions and Patents by the Central Government

Section 102 of the Patents Act confers on the Central Government a power that goes beyond the use of a patented invention for government purposes the power to acquire the patent itself. Section 102(1) provides that the Central Government may, if satisfied that it is necessary that an invention which is the subject of an application for a patent or a patent should be acquired from the applicant or the patentee, as the case may be, for a public purpose, make a declaration to that effect by notification in the Official Gazette. Upon the publication of such a notification, the invention or the patent shall stand acquired by the Central Government.

This acquisition power is the most far-reaching of the government’s powers under Sections 99 to 103 it enables the government to acquire not merely the right to use a patent but the patent itself, extinguishing the patent holder’s exclusive rights in the invention and vesting full ownership of the patent in the Central Government. The acquisition power is an extraordinary one and the Patents Act recognises its gravity by providing, in Section 102(2), for the payment of compensation to the patent holder compensation that shall be determined in the manner prescribed in the Act or if the parties cannot agree, by the High Court.

The acquisition power under Section 102 is analogous to compulsory acquisition of property under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and it engages the same constitutional principles of public purpose and just compensation. The government’s decision to acquire a patent must be motivated by a genuine public purpose it cannot be used as an instrument of competitive advantage or to benefit private parties at the expense of the patent holder. And the compensation must be fair and adequate it must reflect the true commercial value of the patent at the time of acquisition, taking account of the remaining patent term, the commercial potential of the invention and the investment made by the patent holder in developing and protecting it.

Section 102 has been invoked very rarely in Indian patent history the very existence of the power, combined with the prospect of compensation proceedings before the High Court, has generally been sufficient to persuade patent holders to negotiate reasonable licensing terms with the government without the need for formal acquisition. The provision functions, in this sense, more as a background power that influences negotiating dynamics than as a frequently exercised operational mechanism. Its most significant potential application in the modern context is in relation to essential medicines and health technologies the government’s power to acquire patents over critical pharmaceutical compounds provides a powerful negotiating lever in discussions with originator companies about pricing, licensing and access.

Section 103 – Jurisdiction of High Court

Section 103 of the Patents Act provides that any dispute arising under Sections 99 to 102 as to the terms for the use of an invention by the government or as to the amount of compensation or remuneration payable, shall be determined by the High Court having jurisdiction over the patent in question. The High Court’s jurisdiction is thus both residual applicable where agreement cannot be reached between the government and the patent holder and supervisory, providing a judicial forum for the resolution of disputes about the terms and quantum of government use arrangements.

The High Court’s role under Section 103 is not merely to determine compensation on the basis of evidence placed before it but to assess what is fair and adequate in the circumstances of each case. The Court is not bound by any formula or prescribed method for calculating remuneration it must exercise its judgment in light of all relevant factors, including the nature and importance of the invention, the duration and extent of government use, the commercial value of the patent, the investment made by the patent holder and any other considerations that bear on what constitutes fair compensation for the use of the patent holder’s rights.

Government Use in the Public Health Context – The COVID-19 Dimension

The government use provisions of the Patents Act acquired particular public salience during the COVID-19 pandemic, when questions of access to patented vaccines, diagnostics and therapeutic technologies became matters of acute national and global concern. The Indian government’s potential invocation of Section 99 or of the compulsory licensing provisions of Section 84 to ensure access to COVID-19 vaccines and therapeutics was widely discussed in public health and IP policy circles and several petitions were filed before courts and before the Patent Office raising these questions.

While the government ultimately did not formally invoke Section 99 in relation to COVID-19 vaccines, the existence of the power and the government’s demonstrated willingness to use TRIPS flexibilities in the pharmaceutical context, as demonstrated by the Bayer compulsory licence played a role in shaping the licensing arrangements and voluntary agreements that were reached between the government, domestic manufacturers and originator companies during the pandemic. The Serum Institute of India’s manufacture of the AstraZeneca-Oxford vaccine under a voluntary licence and the Biological E. manufacture of the Johnson & Johnson vaccine under a similar arrangement, were in part facilitated by the background threat of government use or compulsory licensing that the Patents Act provides.

The COVID-19 pandemic also renewed the global debate about the adequacy of the TRIPS framework for public health emergencies and about the conditions under which governments can most effectively exercise their rights under Article 31 of TRIPS and Article 31bis, which was inserted into TRIPS in 2017 to facilitate the export of pharmaceuticals manufactured under compulsory licence to countries with insufficient manufacturing capacity. India, as both a major manufacturer and a significant user of essential medicines, occupies a unique position in this global debate and the government use provisions of Sections 99 to 103 are the domestic legal instruments through which India’s engagement with these global questions is given practical effect.

The Relationship Between Government Use and Compulsory Licensing

The government use provisions of Sections 99 to 103 must be understood in relation to the compulsory licensing provisions of Sections 84 to 92 of the Patents Act. Both frameworks enable the use of patented inventions without the consent of the patent holder, but they differ in important respects. Compulsory licences under Section 84 are available to any person not only the government and must be applied for on one of the specific grounds enumerated in Section 84, with the applicant demonstrating that the grounds are made out after a period of negotiation with the patent holder. Government use under Section 99 requires no such application and no prior period of negotiation the government may invoke its use right unilaterally, subject only to the obligation to give notice and to pay remuneration.

Section 92 of the Patents Act provides a further compulsory licensing mechanism that is specifically directed to situations of national emergency, extreme urgency or public non-commercial use. It enables the Controller to grant compulsory licences suo motu on the Controller’s own motion, without a formal application where the Central Government issues a notification that a national emergency or extreme urgency exists. The Section 92 mechanism was invoked in 2012 in the context of discussions about access to essential medicines for HIV/AIDS and other conditions, though it has not been formally used to grant a compulsory licence to date.

The relationship between Section 99 government use and Section 92 compulsory licensing is that of alternative and potentially complementary mechanisms for ensuring access to patented technology in the public interest. The government may choose to use either mechanism or both simultaneously depending on the specific circumstances, the urgency of the public need, the availability of domestic manufacturing capacity and the political and commercial dynamics of the particular situation. In practice, the threat of government use under Section 99 or compulsory licensing under Section 84 or 92 is often sufficient to bring originator companies to the negotiating table on terms that serve the public interest without the need for formal invocation of the statutory powers.

Conclusion

Sections 99 to 103 of the Patents Act, 1970 constitute one of the most important but least understood components of India’s patent framework. They represent the state’s ultimate reserve power over patent monopolies the capacity to use and indeed to acquire, patented inventions for public purposes without the patent holder’s consent, subject to the payment of fair remuneration determined by the High Court. This reserve power has been exercised with restraint in India’s patent history, but its existence has shaped the negotiating environment within which patent holders and the government interact on questions of access, pricing and technology availability.

For patent holders operating in India particularly in sectors such as pharmaceuticals, defence and critical technology the government use provisions are a background legal reality that must inform commercial strategy. A patent holder that prices its products beyond the reach of public procurement, that refuses reasonable licensing terms for government use or that treats its Indian patent as an instrument of pure commercial exclusivity without regard to public interest may find that the government’s reserve powers under Sections 99 to 103 are invoked with consequences that include both the loss of exclusive control over the invention and the obligation to accept remuneration determined not by the market but by the High Court. A patent holder that engages proactively with government access concerns, that prices reasonably for public procurement and that treats its patent rights as a conditional grant subject to public interest obligations will find that the government use provisions, far from being a threat, are a framework within which productive and commercially sustainable relationships between innovators and the state can be built.

References

The Patents Act, 1970 https://ipindia.gov.in
The Patents Rules, 2003 https://ipindia.gov.in
Manual of Patent Office Practice and Procedure https://ipindia.gov.in
TRIPS Agreement Article 31 and Article 31bis https://www.wto.org/english/docs_e/legal_e/27-trips.pdf
Doha Declaration on the TRIPS Agreement and Public Health, 2001 https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm
Bayer Corporation v. Natco Pharma Ltd., IPAB, 2013 https://ipindia.gov.in
National IPR Policy, 2016, DPIIT https://dpiit.gov.in
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 https://legislative.gov.in
WHO TRIPS Flexibilities and Public Health https://www.who.int/health-topics/medicines
Indian Patent Office Official Portal https://ipindia.gov.in

Government Use of Patents – Section 99 to 103 of the Patents Act, 1970

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