One view of compulsory licensing: comparative perspectives from India and Canada.

Author:Ramanujam, Padmanabha
  1. BY WAY OF A PROLOGUE II. COMPULSORY LICENSING: CONCEPT AND SHORT HISTORY III. PROPERTY RULES, LIABILITY RULES AND THEIR COEXISTENCE IN IPR: ONE VIEW OF THE MODEL A. Transaction Costs as Determinant of Choice of Legal Rule B. Licensing C. Licensing and IPR Strength D. Connecting the Dots IV. IPR REGIMES OF CANADA AND INDIA A. Access to Medicine Regime in Canada B. Pharmaceutical Patents in India V. LOCATING CANADA AND INDIA IN THE MODEL A. Compulsory Licensing and its Impact on Strength of IP Regime B. Procedural Problems with Compulsory Licensing in Canada and India C. Voluntary Licensing Works Alone but Cannot Co-Exist with Compulsory Licensing VI. BY WAY OF AN EPILOGUE I. BY WAY OF A PROLOGUE

    Lockean property rights theory (1) establishes that a creation belongs naturally to its creator. There is little disagreement that property and property rights are born simultaneously. Information is an intangible property and is produced through the labour of intellect. Again, invoking Locke, (2) this information should then be private property of the labourer. (3) But information is a non-excludable and non-rival good. (4) Hence, a (legal) framework to grant (a) exclusive right for (b) a limited period helps sequentially (5) balance (a) incentive (for labourer) to produce the information, and (b) access (for society) to make use of the information. This framework is intellectual property.

    So as to favour accessibility of intellectual property thus created, society needs a transaction system whereby the benefits of creation (legally said, property right) can be shared amongst all those who value it. This system is naturally based on some sort of market transactions. The buyer of the right pays some money for it. The seller of the right takes that money as compensation for having made a socially beneficial creation. Where demand meets the supply, price is determined. We achieve an equilibrium.

    However, this may be a difficult equilibrium to achieve because of the inherent non-rival and non-excludable nature of the information good6-once the intellectual property has been divulged to another person it becomes a public good. (7) Such characteristics allow free-riders to take access without paying. (8) Therefore, society needs an artificial mechanism that excludes non-payers, lest the market generates insufficient revenues to compensate the creator for his efforts and dilute his incentives to create that property in the first place. This artificial mechanism is provided by an exclusionary right, called IPR. So while IPR accords temporary monopoly power on the right holder, it results in a deadweight loss in the form of excluding buyers for who the good has become unaffordable. (9) The upside is, IPR framework incentivizes people to innovate and it also propels diffusion on knowledge, thereby helping development of cumulative innovations. Designing an optimal IPR framework therefore demands a compromise between the costs and benefits at both public and private realms.

    As the normative and structural strands of legal theory suggest, IP laws are fundamentally located in the skeleton of property rule. However, given the public good nature of the information product, temporary monopoly imposes huge public costs. Take for example, pharmaceutical innovation. A life-saving drug, when granted a patent, will be sold at a cost unaffordable to a large chunk of population thereby increasing social costs. For such externality that germinates in intellectual property laws, incorporation of liability rules has emerged as a reactionary solution. In this paper, we will attempt to show that proponents of liability rules carry a heavy theoretical burden that needs to be spelt out. (10)

    The paper is an attempt to excavate silences of property-liability framework in a cacophony of compulsory licensing. The remainder of the paper is divided as follows. In Part I, we illustrate the legal framework of compulsory licensing as a mechanism by way of which the right holder of the intellectual property (IP) will have to license the use of her/his rights to another party, at the behest of the government. Part II explores the relationship between compulsory licensing and property-liability framework. We highlight here, that compulsory licensing is a liability-based approach, and its imposition on a foundational property rights based approach on which IP laws are based, needs to attract academic principles that guide this approach. We expect to surface the institutional, conceptual, and theoretical feasibility inherent in the marriage of property and liability based approach for compulsory licensing, through building an analytical narrative. In Part III, IPR regimes of India and Canada are compared with a focus on patents for medicines. In the case of Canada, we look at the institution of compulsory licensing from the view of the Doha Declaration, (11) by way of which relevant clauses that favour implementation of compulsory licensing provisions were incorporated into the text of Trade Related Intellectual Property Rights (TRIPS). (12) The case of India is however, hinged on the regular flexibility in TRIPS, as incorporated in the Indian Patents Act 2005. Conclusion follows in Part IV.


    The term "compulsory license" is often used as an umbrella term for many types of non-voluntary authorizations by the State (or any of the State's machinery) to exercise a patentee's rights without his or her authorisation, such as ex officio licenses, government use, crown (or government) use, licenses to remedy anti-competitive practices, mandatory licenses, and statutory licenses. (13) Compulsory licenses can be given for any kind of intellectual property, and it can take various names. In general, compulsory licensing is used to address anti-competitive issues of IPR. (14) The extensive survey taken by World Intellectual Property Organisation (WIPO) between 2009-11 exposed a wide variety of usages of the term compulsory licensing, (15) which included invoking on account of national or public interest; public health; compulsory cross licensing; failure to work; non-exploitation of IP rights for a period of time; patent-dependency; necessity to supply markets; exporting patented drugs; inter alia. (16) The concept can also take various nomenclatures. For example, in the European Union (and also in the United States), in the case of a single dominant company, the concept is called the 'essential facilities doctrine.' An essential facilities doctrine specifies when the owner(s) of an essential or bottleneck facility is mandated to provide access to that facility at a reasonable price. (17) The term essential facilities doctrine originated in commentary on United States antitrust case law and now has multiple meanings, each having to do with mandating access to something by those who do not otherwise get access. (18) Over time however, the doctrine is more closely associated with anti trust cases, and its application in IP is rather rare. (19) Compulsory licensing is fairly important and frequent however, in copyright statutes. For example, the Copyright Act of 1909 and 1976 in USA, both have compulsory licensing provisions.

    But in no other domain has compulsory licensing been more debated, contextualized and argued over, as in the case of pharmaceutical patents. Health improvements stimulate economic development (21) and so does innovation. If there is a trade-off between the two, it is a difficult choice. Compulsory licensing seems to tip the needle in favour of health, and therefore, has been the source of unending controversies, socio-political maneuvering by interest groups, and schism between industry and civil society. On one hand, industry supporters argue that doling out compulsory licenses reduces incentives to innovate, while on the other, civil society and public health advocates vociferously narrate the perils associated with giving monopoly rights on life saving drugs. Our paper deals with the subject of compulsory licensing, solely on the application of compulsory licenses on pharmaceutical patents.

    It may be worthwhile to have a quick glance at how the global political machinery developed the framework of compulsory licensing. (22) Compulsory Licensing has been an integral part of the patent regime since its inception and at least one hundred countries make compulsory licenses available in one form or another. (23) The introduction of patents in Venice in the fifteenth century was accompanied by a broad set of rules, which included the state's right to issue a compulsory license. (24) Article 5A(2) of the Paris Convention of 1883 also provides for the liability rule. (25) And ever since 1883, this tool has become a fixture in patent systems around the world, and has perpetually been a topic of controversy. (26) Even during the World Wars, compulsory licensing was resorted to for the sharing of aviation technology and the manufacture of penicillin. (27)

    It may be important to briefly dwell on emergence of compulsory licensing in the international framework as it stands today. With the decline of American manufacturing and growth of technology-led firms, the United States began raising the public perception of the importance of IPR. (28) The result was the linking of IP with trade and seeking global protection. (29) This attracted a lot of resistance, particularly by developing countries like India. (30) However, with the intense political maneuvering and bargaining power that America had over trade with India and other countries, coupled with pressure groups of pharmaceutical companies, developing nations succumbed. A comprehensive agreement was tabled and negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade in 1994, called Agreement on Trade Related Aspects of Intellectual Property Rights (31) (TRIPS). Essentially, countries embracing TRIPS were required...

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