GR 121267; (October, 2001) (Digest)
G.R. No. 121267; October 23, 2001
SMITH KLINE & FRENCH LABORATORIES, LTD., plaintiff-appellee, vs. COURT OF APPEALS and DANLEX RESEARCH LABORATORIES, INC., defendant-appellant.
FACTS
Petitioner Smith Kline & French Laboratories, Ltd. is the assignee of Letters Patent No. 12207 for the pharmaceutical product Cimetidine, used as an antihistamine and in ulcer treatment. The patent was issued by the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) in 1978. In 1989, private respondent Danlex Research Laboratories, Inc. filed a petition with the BPTTT for a compulsory license to manufacture and sell its own brand of medicines containing Cimetidine. Danlex invoked Section 34(1)(e) of Republic Act No. 165 (the Patent Law), which allows such an application for medicines after two years from the patent grant, provided it is necessary for public health.
Smith Kline opposed the petition, arguing Danlex had no cause of action, failed to detail how it would work the patent, and that Smith Kline’s own production already satisfied market needs, making a compulsory license unnecessary. The BPTTT granted the compulsory license, ordering Danlex to pay royalties at 2.5% of net sales. Smith Kline appealed to the Court of Appeals, raising issues including violation of the Paris Convention, invalid exercise of police power, unreasonable royalty rate, and non-compliance with publication requirements. The Court of Appeals affirmed the BPTTT decision, prompting this petition.
ISSUE
Whether the Court of Appeals erred in affirming the grant of a compulsory license to Danlex for the patented drug Cimetidine.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The grant of a compulsory license was a valid exercise of police power under the Patent Law (R.A. No. 165). The law explicitly permits compulsory licensing for medicines after two years to prevent patent monopolies and ensure public access to essential drugs, aligning with public health and safety objectives. The Court found the statutory conditions were met: Cimetidine is a medicine, more than two years had lapsed since the patent grant, and the license promotes public interest.
The Court rejected the argument that the license violated the Paris Convention, noting the Convention allows member states to legislate measures to prevent patent abuse, including failure to work the patent. The royalty rate of 2.5% of net sales was deemed reasonable and not confiscatory, as it was consistent with rates set in numerous other patent cases and did not constitute expropriation without just compensation. Finally, the Court upheld the finding that Danlex complied with the jurisdictional requirement of publishing the petition, as evidenced by the submitted affidavit of publication. The compulsory license was thus legally and properly issued.