OFFICE OF THE PRESIDENT - Intellectual Property …onlineservices.ipophil.gov.ph/ipcaselibrary/ipcasepdf/...OFFICE OF THE PRESIDENT I INTELLECTUAL PROPERTY OFFICE I i OFFICE OF THE

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OFFICE OF THE PRESIDENT I

INTELLECTUAL PROPERTY OFFICE I

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OFFICE OF THE DIRECTOR GENERAL - I

351 Sen. Gil Puyat Ave., Makati City OFF) E copy UNITED LABORATORIES, INC. } APPEAL NO. 15-01-01

Petitioner-Appellee } (INTERPARTES CASE NO. 309 } Petition for Compulsory Licen ing

-versus- } Patent No.: 19373 } Issued on : 02 April 1986 } Title: "CARBOSTYRIL ~

KAZAYlIKI NAKAGAWA, ET AL., } DERIVATIVES & PROCESS Respondents-Appellants } FOR PREPARING THE SA E")

NOTICE OF DECISION ~ ~ ATTY. CESAR SANDIEGO ""1JNITID LABORATORIES, •.,//7 <t-~~ _ Counsel for Petitioner-Appellee i. c~ 43 Annapolis St., Greenhills, San Juan Petit~oner:Appellee' ---/~ tf-l6 --o 2­

66 Uni.ted st.reet , ManrlUYOng City

I.B ASHA ASCii ETA PENA & NOLASCO

CbUnsel for R.e~ondets-Appellants6mclth Floors,'Don Pablo Building,

Mali:::RitCity' \' .,- Ir:""" t~~ RUR" 'F 1 ,(",DIREQ;rOR ESTRELLITA B. ABELARDO

Bureau.of Legal Affairs ~ RECEIVED BY, ~ .Intell~al Property Office Philippines t RECEIVED eN; ~ ~1~.::. .

L.....DIRECTOR EPIFANIO M. EVASCO Bureau of Patents Intellectual Property Office Philippines

DIRECTOR CORAZON T. MARQUESES Bureau of Administrative, Financial and Human Resources Development Services Bureau Intellectual Property Office Philippines

GREETINGS:

Please be informed that on 09 September 2002, the Office of thj' Director General rendered a Decision in the above-titled case (copy attached).

IMakati City, 09 September 2002.

Very truly yours, I

. ~~ATTY.~~.BA AOIL Attorne:j'Ji1

·00 INTELLECTUAL PROPERTY bFFICE IPO Building, 351 Sen. Gil Puyat Avenue. Makati City. Phflippines T.." .. lr T i ru»: 7'i2-5450 If) f15 Fnr.·l?90-4l?f12,

Republic of the Philippines

OFFICE OF THE PRESIDENT 1 INTELLECTUAL PROPERTY OFFICE

OFFICE OF THE DIRECTOR GENERAL 351 Sen. Gil Puyat Ave., Makati City

UNITED LABORATORIES, INC. } APPEAL NO. 15-01-01 Petitioner-Appellee } (INTERPARTES CASE NO. 30 8

} Petition for Compulsory Licen ing -versus- } Patent No.: 19373

} Issued on : 02 April 1986 I } Title: "CARBOSTYRIL I

KAZAYUKI NAKAGAWA, ET AL., } DERIVATIVES & PROCES

I!fRespondents-Appellants } FOR PREPARING THE SA E")

NOTICE OF DECISION ATTY. CESAR SANDIEGO Counsel for Petitioner-Appellee 43 Annapolis St., Greenhills, San Juan IMetro Manila I

r QUASHA ANCHETA PENA & NOLASCO Counsel for Respondets-Appellants !

I 6th_7th Floors, Don Pablo Building, f114 Amorsolo St., Legaspi Village ! Makati City I

!

DIRECTOR ESTRELLITA B. ABELARDO fBureau of Legal Affairs tIntellectual Property Office ! Philippines

[DIRECTOR EPIFANIO M. EVASCO Bureau of Patents J Intellectual Property Office IPhilippines IDIRECTOR CORAZON T. MARQUESES Bureau of Administrative, Financial and Human Resources Development Services Bureau Intellectual Property Office Philippines I

IGREETINGS:

Please be informed that on 09 September 2002, the Office of the Director General rendered a Decision in the above-titled case (copy attached). I I

Makati City, 09 September 2002. ! Very truly yours, i

SEP 0 q 20D? f~ ... ~:. .

'"{ , .., ... ATTY.~~.BA f

l~-o,~ IAttorne'.j1il

I !

INTELLECTUAL PROPERTY iIPO Building, 351 Sen. Gil Puyat Avenue. Makati City, Phirippines Tr1Jnk Tint>, 7'i?-'i4'in In I'l'i Fax' fl9()·4f11'l2 ! I

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,i . Republic of the Philippines

, . ' , lOFFICE OF THE PRESIDENT INTELLECTUAL PROPERTY OFFICE IOFFICE OF THE DIRECTOR GENERAL

1t351 Sen. Gil Puyat Ave., Makati City I i I

1UNITED LABORATORIES,INC.} APPEAL NO.1S-Q1-Q1 Petitioner·Appellee, } (INTER PARTES CASE NO. 30 8

} Petition for Compulsory Licen ing

I} Patent No.: 19373 -versus­ } Issued On: 02 April 1986

} Title: "CARBOSTYRIL } DERIVATIVES & PROC } FOR PREPARINGTHE

KAZAYUKI NAKAGAWA, ET AL., } Respondents·Appellants. }

x····-··-----·--·-·-----··-x

DECISION

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SS !AMEli) I I

This is the appeal of KAZAYUKI NAKAGAWA, ET AL., hereinEeferred to

as Respondents-Appellants, from Decision No. 94-21 (PAT) rende ed by the

defunct Bureau of Patents, Trademarks and Technology Transfer (BP )1 on 15

February 1994 in Inter Partes Case No. 3098 granting the petition ~f UNITED

LABORATORIES, INC., Petitioner-Appellee, for compulsory licen,ing under

Letters Patent No. 19373 for CARBOSTYRIL DERIVATIVES AND PRpCESSES

FOR PREPARING THE SAME issued to the Respondents-Appellants pn 02 April

1986. I

The controversy in this case is II

WHETHER OR NOT THE LEGAL REQUIREME~TS FOR COMPULSORY LICENSING ARE COMPLIED WITH. -I

Records show that on 02 April 1986, Respondents-Appellants ~re issued

Letters Patent No. 19373 entitled "CARBOSTYRIL DERIVATIVES AND ,

PROCESSES FOR PREPARING THE SAME" by the BPTTT's predecessor, the

Philippine Patent Office (PPO). The patented invention or product Is an anti­

asthma preparation that can also be used as a broncodllator', more rrliCulartyIf I Now the Intellectual Property Office pursuant to Republic Act No. 8293 otherwise own as the Intellectual Property Code of the Philippines which took effect on 01 January 1998. 2 Any drug that causes relaxation of bronchial muscles resulting in expansion of the air pa sages of the bronchi (Webster Third New International Dictionary, Merriam Webster Inc. p.282).

INTELLECTUAL PROPERTY WFICE IPO Building, 351 Sen. Gil Puyat Avenue. Makati City, Phi ippines 'T!. .,_ T .: . ~~"" ~ -I~J') ..... /~ T"" nnA ~n/"",

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fl known in the pharmaceutical industry as PROCATEROL. More tha two years 1, J later, or on 26 June 1988, Petitioner-Appellee filed a petition for the ompulsory J I licensing of the product invoking Section 34(e) of Republic Act N . 165,3 as f 1 amended by Presidential Decree No. 1263. Petitioner claims, a ong other '1

I things, that it has an authorized capital stock of One Billion and Fi e Hundred I

IMillion Pesos (Php1,500,OOO,OOO), has been in the business of ma ufacturing

and selling pharmaceutical products since its incorporation on 08 Oc ber 1953,

and is financially, technically and manpower-wise capable to make use of the

product for the manufacture of other useful products." i i

In their defense, Respondents-Appellants contend that the Petitioner­

Appellee is neither capable to make use of the product nor does intend to

"work" the same in accordance with the law but that it merely wants t import the

raw materials for manufacturing. They further claim that with the ext nt of their

investment in terms of time, effort and money in the experiment and p rfection of

the product, it would be unjust to deprive them of the exclusive right to use the

same. Considering, too, that they obtained the patent only after twel e years of

communication between them and the PPO, the Respondents-Appell nts assert

that it would be unfair for the Petitioner-Appellee to reap the fruits thereof so .

easily by the mere expediency of a compulsory license. Moreover, th product is fP 3 SEC. 34. Grounds/or Compulsory Licensing> (I) Any person may apply to the Director r the grant of license under a particular patent at any time after the expiration of two years from the date f the grant of the patent, under any of the following circumstances;

xxx (e) If the patented invention or article relates to food or medicine or manufactur products or substances which can be used as food or medicine or is necessary for public health or pu lie safety.

(2) In any of the above cases, a compulsory license shall be granted to the petitioner p vided that he has proved his capability to work the patented product or to make use of the patented roduct in the manufacture of a useful product, or to employ the patented process.

(3) The term "worked" or "working" as used in this section means the manufacture d sale of the patented article of the patented machine, or the application of the patented process for prod tion, in or by means of a definite and substantial establishment or organization in the Philippines and on cale which is reasonable and adequate under the circumstances. Importation shall not constitute "working" (As amended by Presidential Decree No. 1263) 4 As summarized in Decision No. 94-21 (PAT), dated 15 February 1994, pp. 1-2.

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already being worked in the country by the Respondents-Appellants t ough their Ilicensee on a commercial scale, and that the demand is adequately et and on

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reasonable terms."

In granting the petltlon", the BPTTT ratiocinated that the requi ements of f

the law were complied with, that is, the petition was filed after the e piration a;v'l 5 [d, pp. 2-3. r.·

6 The dispositive portion of Decision No. 94-21 (PAT) reads, as follows: 1 I ''NOW THEREFORE, xxx II. That Petitioner be hereby granted a non-exclusive and non-transferable icense to the

manufacture, use and sell in the Philippines its own brands of pharmace ical products containing Respondent's patented invention which is disclosed and claimed in Letters Patent No. 19373;

2. That the license granted herein shall be for the remaining life of said Letters Pa nt No. 19373 unless this license is terminated in the manner herein provided and that no rig t or license is Ihereby granted to the Petitioner under any patent to the Respondent or oth than recited herein;

3. By virtue of this license, Petitioner shall pay the Respondent a royalty on all Ii ense products containing the patent substance made and sold by the Petitioner in the amoun equivalent to TWO AND ONE HALF PERCENT (2.5%) of the net sales in the Philippine currency. The term "net sales" means the gross amount billed for the product pertaining to Le rs Patent No. 19373, less­

(a) Transport charges or allowances, if any, included I such amount; (b) Trade, quantity or cash discounts and broker's or agent's distributor's commissions,

if any, allowed or paid; (c) Credits or allowances, if any, given or made on account of rejection return of the

patented product previously delivered; and (d) Any tax, excise or government charge included in such amount, or m asured by the

production, sale transportation, use of delivery of the products.

In case Petitioner's product containing the patented substance shall contai active ingredients admixed therewith, said product hereinafter identifie product, the royalty be paid shall be determined in accordance with formula:

x x x 4. The royalties shall be computed after the end of each calendar quarter to all go ds containing

patented substance herein involved, made and sold during the precedent quarter d to be paid by the Petitioner at its place of business on or before the thirtieth day of the m nth following the end of each calendar quarter. Payments should be made to the Responde's authorized representative in the Philippines;

5. The Petitioner shall keep records in sufficient detail to enable the Respondent to determine the royalties payable and shall further permit its books and records to be examine from time to time at Petitioner's premises during office hours, to the extent necessary t made at the I

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two (2) years from the date of the grant of the patent, the Produ~ relates to

medicine, and, the Petitioner-Appellee possesses the required c pability as

shown by: first, an authorized capital stock of P1,500,000,000; secon ,a license

to operate a pharmaceutical laboratory and a Certificate of Complian e with the

technical requirements for operating such laboratory, both granted by he Bureau

of Food and Drugs; third, the necessary machinery and equipment fo producing

drugs in capsule or tablet form; and fourth, a workforce of around twf thousand

six hundred (2,600) employees, most of whom, including r1nk-and-file~

expense of Respondent by certified public accountant appointed by R pondent and acceptable to the Petitioner.

6. The Petitioner shall adopt and use of its own trademark or labels on all :f its products containing the patented substance herein involved;

7. The Petitioner shall comply with laws on drugs and medicine requiring previo s clinical tests and approval of proper government authorities before selling to the public r products manufactured under the license;

8. The Respondent shall have the right to terminate the license granted to Petitione by giving the latter thirty (30) days notice in writing to that effect, in the event that petitionetdefaUIt in the payment of royalty provided herein or if the Petitioner shall default in the p rformance of other covenants or conditions of this agreement which are to be performed by th Petitioner:

(a) Petitioner shall have the right provided it is not in default to payment r royalties or other obligations under this agreement, to terminate the license grant to it, giving the Respondents thirty (30) days notice in writing to that effect;

(b) Any termination of this license as provided for above shall not in any ay operate to deny Respondent its rights or remedies, either at laws or equity, or reliv Petitioner of the payment of royalties or satisfaction of other obligations incurre prior to the effective date of such terminator; and

(c) Notice of termination of this license shall be filed with the Bure u of Patents, Trademarks and Technology Transfer.

9. In case of dispute as to the enforcement of the Provisions of this license, the atter shall be submitted for arbitration before the Director of Bureau of Patents, Tr demarks and Technology Transfer duly delegated by him;

10. This License shall inure to the benefit of each the parties herein, to the subsi iaries of and assigns of the Respondent and to the successors and assigns of the Petitioner; an

11. This license shall take effect immediately."

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employees, are professionals and degree holders," The Petitioner Appellee's

capability, according to the BPTTT, is now without any doubt in view its rulings

in previous similar petitions filed by the former and affirmed by the c urts." The

law also does not require a petitioner to work a patented product if it refers to

medicine. As the term "worked" or "working" does not apply, the qu lification to

work the invention is immaterial and is not a condition precedent for t e grant of

the license." It is sufficient that the petitioner possesses the financial resources, e I

technology equipment and machinery and people with technical c mpetence ~

required in drug manufacture.'? I Further, the BPTTT asserted that the fact of the patentee alre y working •t

the product is not a valid objection. Compulsory licensing is intended not only to

give chance to others to supply the public with the quantity of the roduct but

especially to prevent the building up of patent monopolies." The ex usive right

of manufacture, use or sale of an invention relating to food or edicine is

conditioned on allowing any person to do the same after three years 2 from the

date of grant of the patent. Compulsory licensing is not an undue de rivation of

proprietary interest over a patent right because the law sees to it tha even after

the complete monopoly the inventor Is awarded in the form of a bi ateral an~.

7 Ibid. pp. 10-11. 8 Ibid, pp. 11-12 citing United Laboratories, Inc. v. Lawrence Henry, Charles Lants, et al. CA-G.R. No. 10608-SP, 28 September 1981; United Laboratories, Inc. v. Eli Lilly & Co. et al., CA-G.R. o. SP-06777, 14 January 1981; United Laboratories, Inc. v, Nippon Soda Kabushiki Kaisha, CA-G.R. No. 07437-SP, 18 November 1980; United Laboratories, Inc. v. Bristol-Myers Company, CA-G.R. No. 13 75, 30 March 1983; United Laboratories, Inc. v. Frank Weisenborn et al., CA-GR No. 13216-SP, 13 Januar 1983; United Laboratories, Inc. v, Fujisawa Pharmaceuticals Co., Ltd., CA-G.R. No. SP-11275-R, 11 anuary 1982, Pfizer Corporation v, The Hon. Demetrio Wendam, Director of Patents, and United Laborat ies, Inc., CA­G.R. No. SP-13060, 07 January 1982; General Drug & Chemical Co., Inc. v. Newport P aceuticals, Inc., A.C.-G.R. No. SP-13410, 22 November 1983; Barry John Price, et al. v, United Lab ratories, Inc., G.R. No. 82542,29 September 1988, and Graham John Durant, et al. v. Hon. Court of Appe Is, et al., G.R. No. 97247, 31 January 1991. 9 Id. p. 12-13 citing General Drug and Chemical Co. Inc. v. Newport Pharmaceuticals, Inc., al. (AC-G.R. No. SP-13410, 22 November 1983 citing Parke Davis & Co. v. Doctors Pharmaceuticals, In ,L-22221, 31 August 1965 (SCRA 1053) 10 Ibid, pp. 13-14 citing United Laboratories, Inc. v. Bristol Myers Company, CA-G.R. o. 13375, 30 March 1983, and Pfizer Corporation vs. Wendam and United Laboratories, Inc. AC-G.R. No SP-13060,07 January 1982. 11 Ibid, pp. 14-15 citing Parke Davis vs. Doctors Pharmaceuticals, Inc., 14 SCRA 1053, 1965, 12 Reduced to two years after amendment of Republic Act No. 165 by Pres. Decree No. 1263.

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workable licensing agreement and a reasonable royalty under such terms and

conditions as agreed upon by the parties or as fixed by the Director of Patents.

1

I The law, the BPTTT noted, allows compulsory licensing of a paten ed product

relating to food or medicine since these items are vital to the survival and health I of the people. If patents on these items are completely controlled by th

they may become instruments to injure and harm public interest. Th

intent behind compulsory licensing is to give chance to others to suppl

with the quantity of the invention, thereby increasing the supply

leading to reduced prices thereof."

patentee,

legislative

the public

f medicine

Consequently, Respondents-Appellants sought for the reconsi eration of t Decision No. 94-21 (PAT) through a Motion for Reconsiderati n and a i

!

I Supplemental Motion for Reconsideration filed on 25 March 1994 a d 02 May

1994, respectively. Pending resolution of said motion, Republic AC No. 8293

also known by its short title "Intellectual Property Code of the Philip ines" took

effect, abolishing the BPTTT and transferring, among other things, it functions1 to the Intellectual Property Office (IPO).14 On 31 January 2001, the Bureau of

Legal Affairs of the IPO issued a Resolution denying the otion for

Reconsideration for lack of merit. Not satisfied, the Respondents- ppellants t

Ir

appealed to this Office. While the Respondents-Appellants filed thei Brief, the

Petitioner-Appellee did not. Accordingly, this Office ordered on 12 M rch 2002

that the case is deemed submitted for decision. ~

In their appeal, the Respondents-Appellants allege that: I 13 Decision No. 94-21 (PAT) pp. 15-16 citing Section 36, Rep. Act No. 165 before t,endment by Presidential Decree No. 1263, and, United Laboratories, Inc. vs. Eli Lilly and Company, C G.R. No. SP­06777,14 January 1981. I14 SEC. 234. Abolition of the Bureau of Patents, Trademarks. and Technology Transfer. - e Bureau of Patents, Trademarks, and Technology Transfer under the Department of Trade and Indu try is hereby abolished. All unexpended funds and fees, fines, royalties and other charges collected for the calendar year, Iproperties, equipment and records of the Bureau of Patents, Trademarks and Technology Tr sfer, and such t personnel as may be necessary are hereby transferred to the Office. Personnel not absorbed 0 transferred to the Office shall enjoy the retirement benefits granted under existing law, otherwise, they sh Il be paid the equivalent of one-month basic salary for every year of service, or the equivalent nearest fr ctions thereof favorable to them on the basis of the highest salary received. I

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I "THE BUREAU, TROUGH (sic) ITS DIRECTOR, GRAVELY A USED HIS

DISCRETION IN ORDERING THE GRANT OF COMPULSORY LI ENSE TO PETITIONER-APPELEE UNDER SECTION 34(1) (E) OF REPUBLIC A T NO. 165 I DESPITE THE OBJECTIONS INTERPOSED AGAINST IT BY THE RES ONDENTS­APPELLANTS BASED ON THE FOLLOWING GROUNDS:

A) UNILAB HAS NOT SUFFICIENTLY PROVED BY CLEAR AND C NVINCING EVIDENCE ITS ABILITY TO MANUFACTURE PHARMACEUTICAL PRE ARATIONS CONTAINING PROCATEROL;

I (

B) UNCONTROVERTED EVIDENCE PROVED RES ONDENTS­APPELLANTS' CAPACITY TO SATISFY ADEQUATELY THE DEMAN FOR THE DRUG THROUGHOUT THE PHILIPPINES;

C) DECISION NO. 94-21 (PAT) IS TANTAMOUNT TO AN IMPAI MENT OR, OR UNDUE INTERFERENCE WITH THE CONTRACT OR "DI TRIBUTOR AGREEMENT' BETWEEN RESPONDENTS-APPELLANTS AND MARSMAN ILABORATORIES INC.; AND

D) DECISION NO. 94-21 (PAT) IS AN ARBITRARY ENFORCEM NT OF THE PHILIPPINE PATENT LAW'S PROVISIONS ON PATENT COMPULSORY LICENSING WHICH WILL CAUSE A REVERBATING EFFECT AND DISCOURAGE PR SPECTIVE IINVESTORS AND THE TRANSFER OF TECHNOLOGY." 15

According to the Respondents-Appellants, there is no clear and convincing

evidence that Petitioner-Appellee is capable of manufacturing pha maceutical

preparationscontaining the patented product nor has it conducted sta i1ity or bio­

availability studies. While the Petitioner-Appellee was successful i securing

compulsory licensing in the past, each new drug introduced into t e market,

Respondents-Appellants say, is prepared under a particular co dition and

different processes such that jurisprudence would be of no mom nt as the

Petitioner-Appellee has not proved its intention to manufacture the tablet and

syrup dosage forms of the product as its interest lies in the fact that t e same is

more potent and effective than its own product."

Respondents-Appellants also claim that uncontroverted evide ce proved

their capacity to adequately satisfy the demand for the patented pro uct in the

country. As only embellishments are needed to ma~e it appear that a useful 0";ltf:/'

15 Appellant's Brief, p. 5. 1 ., 16 Ibid. pp. 6-7.

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can be produced therefrom, the Respondents-Appellants say th they are

capable of manufacturing and distributing the product in steadily increasing

quantities. 17

It is likewise argued by the Respondents-Appellants that t

decision was tantamount to an impairment of, or undue interferenc

contract or distributorship agreement with Marsman Laboratories, Inc According

to them, the decision is arbitrary and will cause reverbating effect di couraging

prospective investors and transfers of technology. The indiscri inate and

arbitrary grant of a compulsory license, they say, has never been inte ded by the

Supreme Court as can be gleaned from the Court's recent decision upholding

the inviolability of contracts and contractual obligations. Their ontract or

agreement with Marsman Laboratories, Inc., the Respondents-Appel ants posit,

deserves protection of law more so that the said licensee has been distributing

the product in sufficient and in steadily increasing quantity as requ red by the

contract. Hence, the grant of compulsory license would not serve the ublic since

public demand is already being met. Citing the case of Yu v. Court of Appeals, 18

the Respondents-Appellants charge that Decision No. 94-21 (PAT) i indirectly

obnoxious to the constitutional prohibition against impairment of obli ations and

contracts, particularly on exclusive distributorship agreement.19 Const nt resort to

compulsory licensing and its absolute and arbitrary enforcement, Re pondents­

Appellants conclude, is counter-productive as the payment of roya ties is not

enough incentive or remuneration for the time, money and effo spent ~

research and development of the patented product." r '

17 Ibid, pp. 7-9. 18 217 SCRA 328, citing Daywalt v. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587 [1919]; Paras, Civil Code of the Philippines Annotated, 1981, io" Ed., p. 439; 4 Tolentino, Com entaries and Jurisprudence on the Civil Code, 1986 Ed., p. 439; 30 Am. Jur. Section 19, pp. 71-72; Jura 0, Comments and Jurisprudence on Obligations and Contracts, 8th Rev. Ed., p. 336; and 43 C.J.S. 597. 19 Appellants' Brief, pp. 9-11. 20 Ibid, p. 12.

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After due consideration of the foregoing and a review of the r

Office finds no cogent reason to disturb the decision under review.

cords, this

The requirements for the compulsory licensing of patente products

relating to food and medicine are explicitly laid down by law: first, that he petition

must be filed after the lapse of two (2) years from the date of the gra t of patent;

second, that the patented product relates to food or medicine; and, th rd, that the

petitioner is capable to work the product or to make use the of in the

manufacture of another useful product." There is no dispute that he subject

petition for compulsory licensing meets the first two (2) requirements. he alleged

non-compliance by the Petitioner-Appellee with the third requirement s precisely

the first issue raised by the Respondents-Appellants.

According to the Respondents-Appellants, the Petitioner-Appel ee has not

sufficiently proved by clear and convincing evidence its ability to

pharmaceutical preparations containing the patented product. This

otherwise. Instead, this Office finds the BPTTT correct in its conclusi n that the

Petitioner-Appellee meets the third requirement. Indeed, the Petitioner Appellee's

capability to work the patented product or to make use thereof to anufacture

another useful product has already been favorably passed upon i so many

cases including judicial reviews. But jurisprudence notwithstanding, re ords show

that the Petitioner-Appellee in this particular instance, submitted substantial

evidence to prove compliance with the afore-stated requirement of the aw.

anufacture

On this score, the Supreme Court held that the qualifica on of the

petitioner to actually work the invention or product is immaterial, it eing not a

condition precedent before any person may apply for the grant of the Ii ense. It is

sufficient that the petitioner for compulsory licensing possesses the necessary Ifinancial resources, technology equipment and machinery as well as eople with

technical competence required in drug manufacture if amply proved b eVidence~' I

I t'

21 Rep. Act No. 165, Section 34, pars. lee), 2-3. r v I

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on record.22 In this case, the evidence on record amply prove that th Petitioner­ I Appellee possesses the necessary financial resources, technology equipment

It

and machinery as well as people with technical competence requi ed in drug

manufacture. The BPTTT found that,

"x x x there is ample evidence to show that Petitioner poss ses Isuch capability, having been in the drug business for more than hree years, and that it manufactures around 500 phannaceutical produ ts in different dosage forms such as tablets, capsules, powders for suspe ion, liquid suspensions, elixirs, syrups, drops, lotions, emulsions, pare teral preparations and pellets with varied lines of products including anti-bi tics, anti-TB, anti-asthma, anti-infectives, anti-ulcers, anti-bacterial, anti-fu gal, and cardiovascular drugs and others, some of which are listed i the Product Infonnation Catalogue, marked as Exhibit 'H' (see Affidavit fOr. William Torres, par. 2, Exh. '1')

I

"Petitioner has likewise established that it was incorporated way back on October 8, 1953 (Exh. 'C') and its authorized capital stoc has been increased to ONE BILLION FIVE HUNDRED MILLION PE OS (Exh. 'C-1 '). It has been granted the license to operate Phannace tical Laboratory by the Bureau of Food and Drugs (Exh. '0'). It has also een granted the Certificate of Compliance attesting to the compliance with technical requirements for operation of a pharmaceutical laborato by Bureau cI Food and Drugs (Exh. 'E').

"Petitioner also possesses the necessary machineries and , equipments (sic) for producing drugs in capsule or tablet form, su as I balances, Stokes/Manesty and Glen Mixers, V blender, oscill ting i granulators, Fitzmill comminuting machines, BB-3B Tabletting Mac ine, ~ Manesty Accela-COTA 24, and others. (See Affidavit of Dr. Torres, Exh. j

'1', Annex 'B').

"On personnel capability, Petitioner employs around employees of which more than 200 are of managerial rank wh holders of various degrees (chemists, pharmacists, chemical engin ers, mechanical engineers, etc.): around 500 are supervisors, and the re are rank-and-file workers, many of whom are also professionals and ho ders of various degrees. A bio-data of some key personnel is attache as Annex 'A' of (Exh. '1-4') (sic)

"With vast resources of Petitioner in terms of manp wer capitalization and plant facilities, coupled with the fact that it now act ally

are

produces more than 500 different dosage fonns of medicine nder different brandnames (Exh. '1', par. 2), there is no doubt that petif ne~~ • has sufficiently proved that it is capable of making use of the pal nted I_ I

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22 See Parke Davis & Co. v. Doctors Pharmaceuticals, Co., Inc., L-22221, 31 August 1968.

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product, in the manufacturing of pharmaceutical dosage forms theJ. x x X."23

There is, therefore, substantial evidence adduced by the Petitioner­

Appellee to prove compliance with the third requirement of the law. In ases filed

before administrative or quasi-judicial bodies, a fact may be deemed stablished

if it is supported by substantial evidence or that amount of relevan evidence

which a reasonable mind might accept as adequate to justify a conClusir.24

With respect to the claim of the Respondents-Appellants that etidence on

record shows that they have the capacity to adequately satisfy the dFmand for

the drug throughout the Philippines, this Office finds the same is inconsequentlal.

The grant of a compulsory license based on Section 34, par. 1(e) of R,PUbliC Act

No. 165 does not depend on any showing that the patented product i

worked or manufactured or distributed or sold by the patentee. The c

not being

ncurrence I of such condition is required only if the same is invoked as a ground fo the grant

of a petition for compulsory licensing under Section 34, par. 1(a) of R p. Act No.

165. It is not a requirement if the ground or circumstance invoked is thft of under

Section 34, par. 1(e). Section 34, par. 1(e) clearly lays down the attendant I )1

II',.." 1

condition or circumstance as a ground for the grant of a petition for c6mpulsory

licensing, that is, that the patented invention or article, I "relates to food or medicine or manufactured products or sUbsta~ which can be used as food or medicine, or is necessary for public h alth or safety."

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There is nothing in Section 34, par. 1(e) that provides or sugge s or even

implies that the patented product is not being worked or manuf ctured or

distributed or sold by the patentee to qualify as a ground for the grant 01 a petition

for compulsory licensing. f' I i

I 23 Decision No. 94-21 (PAT), pp. 10-11. 24 Revised Rules of Court, Section 5, Rule 133.

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lastly, as regards the Respondents-Appellants' allegationlthat the

assailed decision is tantamount to an impairment of, or undue interfe ence with,

the contract or distributor agreement they have with Marsman Labora ories, Inc.,

and, that the same is an arbitrary enforcement of the provisions of law on

compulsory licensing which will cause reverbating effect and iscourage

prospective investors and the transfer of technology, this Office find the same

without merit. Lest it be overlooked, the grant of patent is a mer privilege

bestowed upon by the State and is in no way, an absolute right. Bec use it is a

privilege, it is regulated by the government and subject to such conditipns as the

law and public policy may dictate. Significantly, this Office stresses fhat it is a

constitutional mandate for the State to regulate or prohibit moncpolles when the

public interests so require.25 Precisely, inventions and other patented products

are of public interest especially if they relate to food or medicine. These

inventions and products certainly play crucial factors in the economy. ~mpulsory

licensing then, is one of such regulatory measures designed ~ prevent

monopolies or abuse on intellectual property rights, specifically econo~ic rights,

as regards such inventions and patented products.

In this connection, it must also be mentioned here that the inv lability of

contracts is limited by the exercise of police power of the State to pro ote public

welfare. Police measures are superior to contracts. The provisions of la allowing

compulsory licensing of patented products, more especially if they rei te to food

and medicines, are, without a doubt, intended to benefit the public. Moreover,

while it is true that every individual has autonomy to enter into any c4ntract, the

contractual stipulations must not be contrary to law, morals, good custofs, public

order, or public policy.26 The unyielding dictum is that the law is consifered bUg into every contract." r r 'II

25 Article XII, Section 19, 1987 Constitution of the Philippines. 26 Article 1306, New Civil Code 27 Banana Growers Collective at Puyod Frams v. National Labor Relations Commission, 276 S RA 557. Ir

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Reviewing the records of the proceedings before the BPTTT,

finds nothing to indicate or show that the assailed decision was a

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enforcement of the provisions of laws on compulsory licensing. T~e BPTTT

arrived at such decision in accordance with the procedures and requirements

prescribed by law. The granting of a petition for compulsory Iicensin is not a

ministerial duty or that which depends solely on the whims and capri es of the I I

petitioner. The process of compulsory licensing under Republic Ac No. 165 t

requires the petitioner to submit evidence to show that any of the fonditions 1 under Section 34, par.1 thereof concurs and that all the requirerl,ents are

complied with.28 Accordingly, the Respondents-Appellants were give not just

adequate but all the opportunity to respond and to oppose the p tition for

his Office

arbitrary

compulsory licensing. They were given their day in court, so to speak, including

this appeal for that matter, to contest the Petitioners-Appellee's ass rtion that

there is a ground for the grant of its petition for compulsory licensing.

To conclude, the provisions of law permitting the grant of ctmpulSOry

licensingof patented inventions or products is intended not only to give hance to

others to supply the public with the quantity of the patented invention Of product.

but especially to prevent the building up of patent monopolies. As notf no less

than by the Supreme Court in one case, said policy is echoed in the e~planatory ~

28 Under Republic Act No. 8293, it is provided that: 0/ VV SEC. 93. Grounds for Compulsory Licensing.- The Director of Legal Affairs may gr nt a license to exploit a patented invention, even without the agreement of the patent owner, in avor of any person who has shown his capability to exploit the invention, under any of circumstances:

following

93.1. National emergency or other circumstances of extreme urgency; 93.2 Where the public interest, in particular, national security, nutrition, health or the evelopment of other vital sectors of the national economy as determined by the appropriate a ency of the Government, so requires; or 93.3. Where a judicial or administrative body has determined that the manner of ex loitation by the owner of the patent or his licensee is anti-competitive; or 93.4. In case of public non-commercial use of the patent by the patentee, without satisfactory reason; 93.5. If the patented invention is not being worked in the Philippines on a comm rcial scale, although capable of being worked, without satisfactory reason: Probided, That the i ortation of the patented article shall constitute working or using the patent. (Sees. 34, 34-A, 34- ,R.A. No. 165a).

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note of Bill No. 1156 which eventually became Republic Act No. the

legislative intent in the grant of a compulsory license was not only to aff rd others

an opportunity to provide the public with the quantity of the patented pr duct, but t165' also to prevent the growth of monopollesf" I

WHEREFORE, premises considered, the instant appeal ik hereby

DENIED. Accordingly, Decision No. 94-21 (PAT) of the BPITT is hereb~ affirmed

~fuh l Let a copy of this decision be served and the records of th subject

petition for compulsory licensing be returned, to the Bureau of Legal fffairs for

the implementation of the terms of the compulsory license. Likewise, letlcopies of

this decision be served to the Directors of Patents and the Adrnlnlstrative,

Financial and Human Resources Development Services Bureau, for itormation

and guidance.

SO ORDERED. I

09 September 2002. Makati City.

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29 See Smith Kline & French Laboratories, Ltd. V. Court of Appeals, et aI., G.R. No. 121867, j4 July 1997 (276 SCRA 224). 1

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