Compulsory licensing in manufacturing may slow investments: EU

The U.S. had also sought clarity from India regarding the CL decision-making process

India’s adoption of Compulsory Licensing (CL) in industrial sectors risks affecting the flow of capital and technology from overseas, a senior European Union (EU) official said. “The extension and wide use of CL in industrial sectors can act as a deterrent for investments, from abroad and within India,” Denis Dambois, First Counsellor and Head of Research and Innovation Delegation of the EU to India, told The Hindu.

The official’s comments come in the backdrop of the imminent finalisation of India’s National Intellectual Property Rights (IPR) policy as well as the EU’s resumption of bilateral meetings on a proposed free trade agreement (FTA). CL is the grant of permission by the government to entities to use, manufacture, import or sell a patented invention without the patent-owner’s consent. The proposed India-EU FTA would include provisions on IPR protection of which CL is an aspect. The IPR policy is also expected to cover CL as the Patents Act (of India) also deals with CL. CL is permitted under the WTO’s TRIPS (IPR) Agreement provided conditions such as ‘national emergencies, other circumstances of extreme urgency and anti-competitive practices’ are fulfilled.

India’s National Manufacturing Policy (NMP) also supports the application of CL across different manufacturing sectors, more specifically to ensure access to the latest green technologies that are patented. The government is relying on NMP to ensure that its ‘Make In India’ initiative is successful.The NMP provides the “option” to entities such as the Technology Acquisition and Development Fund “to approach the government for issue of a CL for the technology which is not being provided by the patent holder at reasonable rates or is not being ‘worked in India’ to meet the domestic demand in a satisfactory manner.” Pointing out that CL was a matter of concern for EU investors, Mr. Dambois said the conditions for granting a CL in India were not clear, especially the usage of the term “worked in India” in the NMP. He doubted whether such conditions can be complied with for products imported into India. It is because the term could mean that if an invention / product is not manufactured in India but imported, it would be a reason to impose a CL. The NMP, however, states that such CLs will be issued only within the provisions of the TRIPS Agreement. According to the NMP, reasonable royalty will be paid to the patent holder in such cases.

So far, India has issued only one CL. In March 2012, Natco Pharma was granted a license for an anti-cancer medicine Nexavar patented by Bayer.

Biswajit Dhar, a trade expert and professor Jawaharlal Nehru University, said there was no ambiguity about the term ‘patent being worked in India,’ which means ‘local manufacturing’. The Indian government had talked about technology transfer as one of the pre-requisites for transforming India into a manufacturing hub, he said.

One way to access technology, in case the patent owner is not interested in working the patent in India or producing commercially in India, is to grant a CL to any Indian company which is willing to do so, Mr. Dhar said.

He said permitting CL does not mean confiscating the patented technology but effecting technology transfer by paying the patent holders reasonable royalties.

The U.S. had also sought clarity from India regarding the CL decision-making process saying it was affecting American stakeholders.

The U.S. had said India was trying to multi-lateralise the approach of promoting CLs in green technology through proposals in the negotiations under the United Nations Framework Convention on Climate Change. Such actions would discourage investment in and dissemination of green technologies, U.S. officials had argued.