PARKE, DAVIS & COMPANY, PETITIONER, VS. DOCTORS’ PHARMACEUTICAL, INC., ET AL., RESPONDENTS.

Parke, Davis and Company versus Doctors' Pharmaceutical

The Case

This is a petition for review brought by Parke, Davis and Company, a foreign corporation organized under the laws of the State of Michigan and owner of a Philippine patent for a process of manufacturing antibiotics, against Doctors' Pharmaceutical, Inc., a domestic corporation, and the Director of Patents. Parke, Davis asks the Supreme Court to set aside the decision of the Director of Patents granting Doctors' Pharmaceutical a compulsory license to manufacture and sell medicinal preparations containing chloramphenicol, the chemical substance covered by the patent. The case matters because it is the leading authority on compulsory licensing of patents relating to medicine under the Philippine Patent Law, and it teaches that the exclusive right of a patentee yields, after three years, to the public interest in an adequate and reasonably priced supply of medicine.

Procedural History

Doctors' Pharmaceutical first wrote Parke, Davis requesting a voluntary license to manufacture and sell its own brand of medicine containing chloramphenicol. Parke, Davis replied asking for information on the former's facilities and plans, and Doctors' Pharmaceutical answered that it did not intend to manufacture chloramphenicol itself but merely to use it in its own preparations, invoking the express provision of Philippine law on patents in existence for more than three years. When Parke, Davis proved unwilling to grant a voluntary license, Doctors' Pharmaceutical filed a petition with the Director of Patents, later amended, praying for a compulsory license under the patent. Parke, Davis filed a written opposition. At the hearing, Doctors' Pharmaceutical abandoned three of its four grounds and confined itself to the ground that the patented invention relates to medicine and is necessary for public health and safety. After the parties presented oral and documentary evidence and submitted memoranda, the Director of Patents rendered his decision granting the license prayed for and ordering the parties to submit a licensing agreement, failing which he would fix the terms and conditions. Parke, Davis then interposed the present petition for review before the Supreme Court, imputing eleven errors which the Court reduced to the principal question of whether the Director of Patents gravely abused his discretion.

Facts

Parke, Davis and Company is a foreign corporation with principal office in Detroit, Michigan, and owner of Letters Patent No. 50, entitled Process for the Manufacturing of Antibiotics, issued by the Philippine Patent Office on February 9, 1950. The patent relates to a chemical compound commonly called chloramphenicol and contains ten claims, nine of them process claims and one a product claim to the chemical substance itself.

Doctors' Pharmaceutical, Inc. is a domestic corporation with principal office in Caloocan City. On October 9, 1959, its general manager wrote Parke, Davis requesting a voluntary license to manufacture and produce its own brand of medicine containing chloramphenicol and to use, sell, distribute, or otherwise dispose of the same in the Philippines on reasonable and mutually satisfactory terms. Parke, Davis asked for information on its facilities and plans, and Doctors' Pharmaceutical replied that it did not intend to manufacture chloramphenicol itself but merely to use it in its own brand of medicinal preparations, stressing that its request rested on the express provision of Philippine law covering patents in existence for more than three years.

As Parke, Davis was not inclined to grant the request, Doctors' Pharmaceutical filed on March 11, 1960 a petition with the Director of Patents, later amended, praying for a compulsory license on four grounds: that the invention relates to medicine and is necessary for public health and safety; that Parke, Davis is unwilling to grant a voluntary license, unduly restraining production and tending toward monopoly; that the demand for the medicine is not being met to an adequate extent and at reasonable prices; and that the invention is not being worked in the Philippines on a commercial scale. Parke, Davis opposed, alleging among others that a compulsory license may issue only to one who will work the patent, that Doctors' Pharmaceutical does not intend to work it but merely to import the product, and that the invention is not necessary for public health and safety. At the hearing, Doctors' Pharmaceutical abandoned the second, third, and fourth grounds and relied solely on the first. The Director of Patents then granted the license, and Parke, Davis elevated the matter to the Supreme Court.

Issues

• Whether or not the Director of Patents gravely abused his discretion in granting a compulsory license under Section 34, paragraph (d), of Republic Act No. 165 for a patented invention relating to medicine.
• Whether or not the applicant must prove that the invention is not only related to medicine but also indispensable to public health and safety.
• Whether or not a compulsory license may be granted to an applicant who does not intend to work the patented invention itself but merely to manufacture its own brand of medicinal preparations containing the patented substance.
• Whether or not the fact that the patentee is himself working the invention and holds the exclusive right for seventeen years bars the grant of a compulsory license.

Applicable Provisions

Section 34 of Republic Act No. 165, the grounds for compulsory license, provides:

Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of three years from the date of the grant of the patent, under any of the following circumstances: (a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of being so worked, without satisfactory reason; (b) If the demand for the patented article in the Philippines is not being met to an adequate extent and on reasonable terms, without satisfactory reason; (c) If by reason of the refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licenses or to the purchase, lease or use of the patented article or working of the patented process or machine of production the establishment of any new trade or industry in the Philippines is prevented, for the trade of industry therein is unduly restrained; or (d) If the patented invention relates to food or medicine or is necessary for public health or public safety.

This is the very provision under which the license was granted, and its disjunctive enumeration is the textual anchor of the ruling.

The same Section 34 defines the term worked or working:

The term worked or working as used in this section means the manufacture and sale of a patented article, or the carrying on of a patented process or the use of a patented machine for production, in or by means of a definite and substantial establishment or organization in the Philippines and on a scale which is adequate and reasonable under the circumstances.

The Court uses this definition to hold that the requirement of working does not apply to the medicine ground in paragraph (d).

Section 36 of Republic Act No. 165, the grant of license, provides:

If the Director finds that a case for the grant of a license under section thirty-four hereof has been made out, he may order the grant of an appropriate license and in default of an agreement among the parties as to the terms and conditions of the license he shall fix the terms and conditions of the license in the order. The order of the Director granting a license under this Chapter, when final, shall operate as a deed granting a license executed by the patentee and the other parties in interest.

This provision supplies the authority for the Director's order and for his fixing the terms in default of agreement.

Ruling

On the first issue, the Court held that no grave abuse of discretion attended the grant. The circumstances in Section 34 are in the disjunctive, each standing alone and independent of the others, so that any one of them suffices to support a license. For the medicine ground in paragraph (d), it is enough that the application be made after three years from the grant of the patent and that the Director find that a case has been made out. Since Parke, Davis admitted that chloramphenicol is a medicine, the patent was granted on February 9, 1950, and the application was filed in 1960, more than three years had elapsed and the conditions were fulfilled.

On the second issue, the Court held that the applicant need not prove that the invention is both related to medicine and indispensable to public health and safety. It is sufficient that the invention be related to medicines; the law does not require that it be at the same time necessary for public health or public safety. The Court added that necessity admits of many degrees, and that even on the assumption that both conditions must concur, both were present, since chloramphenicol was shown to be an effective cure for gastro-enteritis and other diseases.

On the third issue, the Court held that Section 34 does not require the applicant to work the patented invention when the invention refers to medicine, for the term worked or working does not apply to the circumstance in paragraph (d). The Director of Patents had himself ruled that the qualification of the petitioner to work the invention is immaterial and is not a condition precedent to the grant. In any event, Doctors' Pharmaceutical did not intend to manufacture the patented substance itself but merely its own brand of preparations containing it, and it was in fact staffed with competent personnel and equipped with adequate laboratories and machines.

On the fourth issue, the Court held that it is not a valid ground to refuse the license that the patentee is himself working the invention and holds the exclusive right for seventeen years, because the provision permitting a compulsory license is intended not only to give others a chance to supply the public but especially to prevent the building up of patent monopolies. The Court likewise rejected the claim that the grant was against public interest, since the law must be observed until modified or repealed, and the importation of chloramphenicol would increase the supply of medicine and substantially reduce its price.

Doctrine

Under Section 34 of Republic Act No. 165, the grounds for a compulsory license are alternative and independent, and the presence of any one of them, after the expiration of three years from the grant of the patent, suffices to support the grant. For a patented invention relating to food or medicine under paragraph (d), it is enough that the invention be related to medicine; it need not be shown that it is also indispensable to public health or safety, and the applicant need not himself work the patented invention. The patentee's exclusive right for seventeen years does not bar the grant, because compulsory licensing exists precisely to prevent the building up of patent monopolies and to secure an adequate supply of medicine at reasonable prices.

Disposition

The Supreme Court affirmed the decision of the Director of Patents granting the compulsory license to Doctors' Pharmaceutical, Inc., with costs against Parke, Davis and Company.

Remember This

Memorize this line: for a patent on medicine, after three years, any person may obtain a compulsory license, and the applicant need not work the invention himself. Examiners use this case to test the disjunctive nature of the Section 34 grounds and the policy against patent monopolies over medicine.