Commercial Law

Smith Kline & French Laboratories, Ltd. vs Court of Appeals (2001)

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G.R. No. 121267 – 368 SCRA 9 – Mercantile Law – Law on Intellectual Property – Law on Patents – Compulsory License 

In August 1989, Danlex Research Laboratories petitioned before the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) that it may be granted a compulsory license for the use and manufacture of the pharmaceutical product Cimetidine. Cimetidine is useful as an antihistamine and in the treatment of ulcers. Cimetidine is originally patented to Smith Kline and French Laboratories, Ltd. in 1978, and the said patent is still in force at the time of application by Danlex Research.

The BPTTT granted the application of Danlex Research together with a provision that Danlex Research should be paying 2.5% of the net wholesale price as royalty payment to Smith Kline. This was affirmed by the Court of Appeals.

Smith Kline assailed the grant as it argued, among others, that the same is an invalid exercise of police power because there is no overwhelming public necessity for such grant considering that Smith Kline is able to provide an adequate supply of it to satisfy the needs of the Philippine market; that a provision in the Philippine Patent Laws is violative of the Paris Convention to which the Philippines is a signatory.

To explain the second contention, Smith Kline states that the Paris Convention only allows compulsory licensing if the original licensee (patent holder) has failed to work on the patent; that therefore, the provision in the Philippine Patent Laws which adds other grounds for the granting of compulsory license i.e. monopoly, is invalid and contrary to the Paris Convention.

ISSUE: Whether or not Smith Kline is correct.

HELD: No. The granting is a valid exercise of police power. Cimetidine is medicinal in nature, and therefore necessary for the promotion of public health and safety.

On the second contention, Section A(2) of Article 5 [of the Paris Convention] unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is “failure to work;” however, as such, is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms of categories of abuses. The legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies. Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting.

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