Compulsions: Prospects for Mandatory Licensing of Patents in Nigeria
The recent surge in the number of confirmed cases of COVID-19 in India has furthered the discussions on the propriety of exclusive patent rights in cases of national or global emergencies impacting public health and safety. The emergence of the virus in late 2019 and 2020 has led multilateral efforts involving, many pharmaceutical companies, research institutes and governmental agencies to venture into research and development of vaccines to stem the onslaught of the virus. Many vaccines which have successfully rolled off testing and production, are already being administered to citizens worldwide; also, various vaccine diplomacy issues have come to the fore.
Going down history lane, the COVID-19 pandemic is not the first major public health challenge that has forced the world into rethinking the exclusivity rights of the patent holders. The early years of the 21st century have been filled with the conversation on relieving patentees of their rights on drugs for HIV/AIDS, tuberculosis, etc. to ensure that majority of the people are treated. As the battle for inoculating the world continues, there has been a call for the waiver of the intellectual property (IP) rights to allow (third party) local production from different countries to deepen vaccination which is currently low. While this call has been met with contentions from different parties, another option that can be explored is to adopt compulsory licensing (CL).
CL is a licence granted by the government to a third party to use the patented invention to restrict the rights of the patentee to stop the abuse/misuse of the rights by the property holder (the patentee) and to prevent the negative effect of such action on the public. Once CL is granted to an applicant, it gives him (the applicant), the right to legally carry out the invention or innovation without being liable. CL had become a tool for easy access to HIV/AIDS drugs in Thailand, Mozambique, Zambia, Zimbabwe and Malaysia (for example in Malaysia, CL led to the reduction of the cost of three patented medicines by 81% and in increase of treatment capacity from 1,500 to 4,000).
Coming home to Nigeria, the Patents and Designs Act (PDA) provides for CL which can be granted by an application to the Federal High Court (FHC) pursuant to section 251(1)(f) 1999 Constitution of the Federal Republic of Nigeria (as amended) (1999 Constitution). This article, therefore, seeks to examine how CL works in Nigeria, the conditions to be fulfilled by an applicant and the procedure for the grant of CL. This article concludes with the analysis of some of the gaps in the procedure for the grant of CL, with discussions on the treaties having an impact on CL.
Patents in Nigeria: The Concept, Rights and Grants
Nigeria’s first legislation on Patents were introduced in 1900 to the Lagos Colony and the Southern Protectorate through the Patent Ordinances No. 27 and No. 17 of 1900. The Northern Protectorate in 1902 equally had the Patent Proclamation of 1902, and then the Patent Ordinance 1916 which repealed all the existing laws following the amalgamation of the Southern and Northern Protectorates in 1914. Thereafter, there was the Registration of UK Patent Ordinance in 1925 and the Patents (Limitation) Decree of 1968 (Decree) which replaced the former. It is the Decree that has now been adapted into the PDA.
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Patent denotes a monopoly right in respect of an invention. It is the grant to a person for an invention for a limited time to prevent any other person from exploiting such an invention without the consent of the person. Unlike copyright that is vested in the author whether registered or not, patents must be registered to be enforceable, and must satisfy the conditions in the PDA to wit, it: is new and a result from the inventive activity which is capable of industrial application; or constitutes an improvement upon a patented invention.
The right of the patent is granted to the statutory inventor, that is, the first to file notwithstanding the statutory inventor, not being the true inventor or having a valid claim by foreign priority. However, the true inventor is entitled to be named in the patent whether or not he is the statutory inventor. Once a patent is granted and while it lasts for a period of twenty (20) years subject to payment of annual fees, it precludes any other person from making, importing, selling or using the product where it is granted in respect of a product, and where it is granted in respect of a process, prevents anyone from applying the process or doing, in respect of the product obtaining directly by means of the process.
Compulsory License of Patents in Nigeria
Though section 11 PDA provides for CL and official use of patents for government agencies, the discussion in this article is limited to CL. However, there are similarities between a CL and a grant of patents for official use (which includes the period of emergency) and this is that both give the third party the right to exploit the right of the patent without any liability imposed on such third party.
CL can be critical, with direct life-saving impact by whittling down healthcare costs or widening access to essential drugs. CL can both be a shield and a sword. Depending on the willpower of the State, CL can be used to infringe the right of a patentee and grant CL to a third party, effectively making the investment climate harsh, for the patentee. Thereafter, a third party, which may be favoured by the State can apply for a CL. In another way, CL can be used to either mount pressure on the patentee to establish manufacturing facilities and consequently speed up innovation and economic inputs or lead to the reduction of the price, since there will be larger demand even if the monopoly profits will be reduced. CL can equally be used to break the monopoly and allow a free entry market operation.
As it stands in Nigeria, there appears to be no record of a grant of CL since the enactment of the PDA. However, the closest scenario where a third party infringed a patentee’s right was in Rhone – SA Poulenc and May & Baker v. Lodeka Pharmacy. The trial court in resolving the dispute refused the the Defendant’s argument that the infringement of the patents of the Plaintiffs was in furtherance of the use by the government on the authority of section 46(1) United Kingdom (UK) Patents Act of 1949. In this case, the Federal Ministry of Health permitted the Defendant to supply the patented drug for the Ministry. The claimant’s contention that the UK Patents Act (UKPA) does not apply to Nigeria was upheld by the trial court.
CL as provided in Part I, First Schedule, PDA can be granted to a person. Though Part I does not define “person” as it did under Part II to include the Government or a Ministry, it is believed that “person” will include either natural or artificial person(s). CL is granted whether, four years after filing for the patent, or three years after the grant of the patent, whichever period last expires, provided one or more of the grounds stated under Paragraph 1, Part I, First Schedule, PDA can be proven. It is prescient, in examining these grounds to make recourse to the to interpretative resources around the UKPA 1977 like the Halsbury’s Law of England given the similarity of its provisions with the PDA. These grounds include, that:
i. the patented invention, being capable of being worked in Nigeria, has not
been so worked
The applicant for the CL must establish that there has not been any working of the patent since it has been granted. Thus, an invention will be deemed not capable of being so worked where the special tools or skilled labour needed are to be imported.
ii. the existing degree of working of the patented invention in Nigeria does
not meet on reasonable terms, the demand for the product
The applicant here must be able to establish that the demand is existing demand, and not one which he hopes to create upon grant. The demand can equally be an export demand.
iii. the working of the patented invention in Nigeria is being hindered or prevented by the importation of the patented article
CL can be used as a tool to allow local production of the invention or innovation notwithstanding that there is a continued importation of the patented article. Since a patent restricts carrying out the same invention or innovation, the grant or attempt to grant CL may force the patentee to either meet up with production or agree on licensing with the third party.
iv. by reason of the refusal of the patentee to grant licenses on reasonable terms, the establishment or development of industrial or commercial activities in Nigeria is unfairly and substantially prejudiced
This ground is however different from the ‘Fair, Reasonable and Non-Discriminatory (FRAND) Licensing’ in that the FRAND is a voluntary commitment by the licensor to negotiate on FRAND terms with the licensee whereas CL forces the licensor to enter into license arrangement where there is no middle point for both parties.
To be granted a CL, such a person aside from the grounds stated above must satisfy the court that the patentee has refused to grant him a license on a reasonable term and within a reasonable time and that there is a satisfactory guarantee to the court that he will remedy the deficiencies (or satisfy the requirements) which gave rise to his application. The PDA did not provide for what will be reasonable or satisfactory as the case may be. What is ‘reasonable’ has been defined by Niki Tobi, JSC as ‘fair, proper, just, moderate, suitable under the circumstances.’
Procedure for Grant of Compulsory License in Nigeria
The PDA by Paragraph 1, First Schedule provides that such an applicant “may apply to the court for the grant of a compulsory license.” The use of “may” gives the applicant the option to first approach the court or go through the Registrar as provided under the Patents Rules (PR). This is because the PDA, being primary legislation supersedes the PR – a subsidiary legislation pursuant to section 30 PDA; therefore making the direct approach to the court still valid. Where the applicant opts to approach the court for the grant of CL, such application will be begun vide order 53, rule 1(2) Federal High Court (Civil Procedure) Rules 2019 (FHC Rules) by the use of originating motion after which the Registrar of Patent will be notified.
Meanwhile, where the applicant opts to approach the Registrar of Patents rather than or before the court, the applicant is to apply to the Registrar using Form 7 PR and accompanied with an unstamped copy and a statement in duplicate which will set out the nature of the applicant’s interests and the facts upon which he is establishing his case/application. Thereafter, the Registrar will inform the patentee for a fair hearing. The patentee may oppose the application for the license by lodging a statement that sets out the grounds on which he is opposing the application and the applicant has the right to respond. Subsequently, the patentee and the applicant may, pursuant to Rules 38 and 39 PR, lodge evidence in answer and deliver to the applicant, a copy thereof after which the applicant will be notified to apply to the court within two months for an order granting CL to the applicants on the grounds stated above.
Flowing from the later procedure, the bureaucracy is needless and time-demanding. This is confirmed by Rule 41, PR which provides that the Registrar shall inform the applicant upon completion of evidence and thereafter the case will be deemed to stand for the determination of the court. The implication of this is that resort is had to the first procedure and all the steps applicable, will therefore follow. From the practice of the use of originating motion, such a respondent (the patentee) will ordinarily be entitled to still “counter” such depositions contained in the accompanying affidavit to such a motion. This no doubt lengthens the time for the application of CL.
The PDA, PR and the FHC Rules should rather be amended to allow either the Registrar to grant the license and give the patentee the right of appeal within a limited period as applicable under section 49(1) UKPA or allow the Registrar refer the application alongside the already filed evidence as affidavits before the court without giving the parties the right to file any process before the court.
Nigeria and Treaties on Compulsory License
There are treaties that Nigeria has ratified, that regulate CL worldwide. The major challenge with all these treaties is their application in light of the provision of section 12 1999 Constitution which provides that treaties be domesticated by enactment into law by the National Assembly. Some of these treaties include the Trade Related Aspects of Intellectual Property (TRIPS), Doha Declaration 2001 (the amendment of TRIPS in 2005 implemented the Doha Declaration), and the Protocol Amending TRIPS 2005(Protocol).
Accordingly, Paragraph 5(b) Doha Declaration provides that “each Member has the right to grant compulsory license and the freedom to determine the grounds upon which such licenses are granted.” The essence of the Doha Declaration was to introduce flexibilities in the TRIPS in other to overcome harsh IP barriers to accessing essential medicines such as HIV/AIDS, malaria and tuberculosis medications.
Before the coming to force of the Protocol on 23 January 2017, Article 31(f) TRIPS had restricted the grant of CL to “the supply of the domestic market of the Member authorizing such use.” The implication, therefore, was that Member States, most especially developing countries like Nigeria, were hit with a catch-22 situation considering their lack of manufacturing capacity and therefore denied access to these drugs. Therefore, Article 31bis the Protocol (which amended Article 31(f)), offered a respite by allowing developing countries to issue CL to import those drugs.
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From the above, it appears that despite the attempt of the World Trade Organisation to resolve the impasse surrounding CL, the problem still does not appear to have been solved. One of the challenges for the implementation of the Protocol was the length of time it took for the Protocol to come into force – 12 years. The second obstacle is the obligation it imposes on the Member States to effect changes in their laws to be able to explore this option under the Protocol.
Patent laws are national and if there must be some form of concessions to allow CL, both the laws of the importing and exporting countries must be amended to allow the importation and exportation of the patented goods. The importing country must therefore amend its laws to allow CL to be granted for imported goods while the exporting country equally does the same to allow exports. Another challenge is the ‘reasonable commercial terms and conditions’ and ‘reasonable period of time’ under Article 31(b) TRIPS, and ‘adequate remuneration’ under Article 31(h) TRIPS (and retained under Paragraph 2 Annex to the Protocol) required to be paid to the right holder, all of which were not defined by the treaty. The question is: what will be the threshold in determining these conditions, considering the research and development that has been expended into the discovery and production of the patented article?
Considering the complexities that may arise from the grant of CL, other options like parallel imports (PI) or differential pricing strategy (DPS) may be explored in case of extreme emergencies. PI, also called gray-market imports are goods produced genuinely under protection of a trademark, patent, or copyright, placed into circulation in one market, and then imported into a second market without the authorisation of the local owner of the intellectual property right. Where the DPS is adopted, it implies that there are various prices for different countries, mostly between the developed and developing countries. The fixing of these prices will therefore depend on the economic situation of each of these countries. However, the challenge with this particular option is it may lead to PI wherein goods are bought at a country where the price is being lowered and sold at another where the cost is high.
Just like the fundamental human rights as contained in Chapter 4 1999 Constitution can be derogated in case of emergencies and some other prevailing circumstances, IP rights should equally be curtailed where same would be antithetical to the economic progress of the State or the general well-being of the public. Though the above exposition appears to have dealt more with CL for public health cases, that does not mean it will always have to do with health-related matters. Considering the benefits of CL, it can be used to open up the economy for more productive activities, most especially where the patent is being used to furtherance monopoly or other anti-competitive objectives, exemplified unnaturally high prices.
Nigeria, can therefore at this point re-evaluate her laws on CL, widen its scope to address many areas not covered as compared to the UKPA, and increase her focus on the technological advancement and research to continue to develop homegrown solutions to national challenges. However, it is equally necessary to state that though CL may be part of the options towards local production where rights are not waived; many other factors are involved in production generally, vaccine inclusive and these include trade secrets, technical know-how, technological advancements etc which may make the grant of CL ineffective on the long run. Thus, rather than the grant of CL, the government can through diplomacy, investment guarantees and tax waivers, amongst others win such a patentee into either production or technology transfer, thereby creating a win-win situation for all parties involved.