Sahar Iqbal
Akhund Forbes, Karachi
sahar.iqbal@akhundforbes.com

The legal framework in Pakistan: compulsory licences and patent rights

The TRIPS Agreement (Agreement), established alongside the World Trade Organization (WTO) in 1994,^[1] aimed at creating a global intellectual property rights framework, standardising legal norms across member states. Pakistan became a signatory to the Agreement in 1995, which required a renewal and modification of Pakistani IP laws to comply with the mandates under the Agreement. Previously, the governing laws for intellectual property were: Merchandise Marks Act, 1889, Patents & Designs Act, 1911, Trademarks Act, 1940 and the Copyright Ordinance, 1962. After Pakistan signed the Agreement, the following laws were enacted: Copyright Amendment Ordinance, 2000, Registered Layout-Designs of Integrated Circuits Ordinance, 2000, Registered Designs Ordinance, 2000, Patents Ordinance, 2000,^[2] and the Trade Marks Ordinance, 2001.

Before the Agreement, many countries excluded pharmaceutical products from patentability to ensure affordable drug prices. The Agreement introduced product patents, enabling pharmaceutical companies to set high prices and recoup research and development costs, which often made medicines unaffordable to the underprivileged. The blame for high pricing is not to be placed solely on big pharma. Devaluation of developing currencies, for example the Pakistani Rupee, makes it difficult to purchase imported medication at low rates. Compulsory licensing, allowed by the TRIPS Agreement under Article 31, permits governments to supply generic versions of patented treatments through domestic production, therefore significantly reducing purchase prices.

In Pakistan, chapter XVI of the Patents Ordinance, 2000 (Ordinance) delineates various aspects of compulsory licences, licences of right, exploiting of patents and revocation, in compliance with Article 31 of the Agreement.

Section 58 of the Ordinance focuses on the exploitation of patented inventions by either a government agency or a designated third party. Exploitation of a patent is essentially the Federal Government’s unilateral permission granted to local manufacturers to produce patented medicines. This section outlines specific circumstances under which exploitation may be allowed and includes cases where exploitation serves the public interest, such as national security, nutrition, health, or the development of vital sectors of the national economy. Additionally, exploitation may be authorised if the Federal Government determines that the patent owner or licensee is engaging in anti-competitive practices or if the patent holder refuses to grant a licence to a third party on reasonable commercial terms.

To ensure fairness, the Federal Government must provide an opportunity for the patent owner and any interested parties to be heard before making a decision to grant a compulsory licence. Any exploitation of the patented invention should be limited to the authorised purpose and requires providing the patent owner with adequate remuneration.

Moreover, under section 59, which grants powers to the Controller concerning the issuance of compulsory licences, the Controller may issue a non-voluntary licence on request, to prevent abuses resulting from the exercise of patent rights, such as when the patent owner fails to work the invention. However, a non-voluntary licence will not be granted if the patent owner can demonstrate circumstances justifying the non-exploitation or insufficient exploitation of the patented invention in Pakistan.

The provisions regarding hearings, fees, variations in terms, and termination of authorisations outlined in section 58 also apply to the issuance of non-voluntary (compulsory) licences under section 59.

Furthermore, the Patents Rules, 2003 delineate the procedural requirements for compulsory licences issued under the Patents Ordinance, 2000.

Remdesivir and the Covid-19 Situation in Pakistan

In 2020, Gilead Sciences signed a non-exclusive voluntary licensing agreements with five generic companies in India and Pakistan,^[3] including Ferozsons Laboratories in Pakistan, to manufacture and distribute Remdesivir (an experimental treatment for Covid-19). The agreements allowed the companies to set their own prices and did not require royalty payments to Gilead until the WHO declared an end to the Covid-19 public health emergency or approved another medicine or vaccine for the virus. This, however, was not a compulsory licence imposed on Gilead but was granted to Ferozsons and other generic pharmaceutical manufacturers voluntarily by Gilead. Moreover, when Gilead Sciences Inc. granted a voluntary licence to Ferozsons for the generic production of the Hepatitis C Virus (HCV) tablet ‘Sovaldi’,^[4] the price of the medication was significantly reduced. In cases where voluntary licences are not granted, compulsory licensing can be a viable and preferable option during times of necessity, particularly in justified circumstances such as pandemics, to ensure the availability of life-saving medicines.

However, voluntary licences often have territorial restrictions on where the licensed product can be marketed:^[5] Article 31(f) of the Agreement requires compulsorily licensed products to primarily serve the domestic market, unless it is issued to address competition violations. Therefore, the constraints imposed by Article 31(f) and potential litigation against governments from pharmaceutical companies make it extremely difficult to distribute generic medicines produced under compulsory licences.

Conclusion

It is crucial to find a balance between intellectual property rights and access to affordable medication in developing countries. While the introduction of product patents under the TRIPS Agreement allows pharmaceutical companies to safeguard their business interests, compulsory licensing under Article 31 of the Agreement provides a solution by enabling governments to supply generic versions of patented drugs through domestic production. Despite the potential limitations imposed by territorial restrictions and Article 31(f), voluntary licences, such as the one granted by Gilead for Remdesivir production, have resulted in significant price reductions. It is worth noting that the Patents Ordinance, 2002 in Pakistan significantly aligns with the TRIPS Agreement, striking a balance between protecting pharmaceutical companies’ business interests and promoting access to affordable medication.