Price v. United Laboratories
REITERATIONFacts
The Antecedents: Petitioners Barry John Price, John Watson Clitheron, and John Bradshaw, assignors to Allen & Hanburys, Ltd., are the owners of Philippine Patent No. 13540, granted on June 26, 1980, for a pharmaceutical compound known as "aminoalkyl furan derivatives." Respondent United Laboratories, Inc. (UNILAB) sought a compulsory license to utilize this patented compound in its own brands of medicines and pharmaceuticals, asserting its capability and experience in the pharmaceutical business. Procedural History: UNILAB filed a petition for a compulsory license (Inter Partes Case No. 1683) with the Philippine Patent Office. Following a hearing, the Patent Office granted UNILAB a compulsory license on June 2, 1986, subject to ten terms and conditions, including a royalty payment of 2.5% of net sales. The patentees appealed this decision to the Court of Appeals (CA-G.R. No. SP-09308), which dismissed their appeal on December 4, 1987. The Petition: The patentees have petitioned this Court for a review of the Court of Appeals' decision, raising four grounds for error. These include the contention that the Director of Patents unilaterally determined the license terms without negotiation, that UNILAB lacked the required capability to use the compound before filing the petition, that the entire patent was awarded when only one claim was disputed, and that the royalty rate was unfair. The patentees argue that the compulsory license should have been limited and that the royalty determination was improper. They seek a reversal of the appellate court's affirmation of the compulsory license grant.
Issue(s)
Whether the Director of Patents erred in unilaterally determining the terms and conditions of the compulsory license. Whether the respondent possessed the legally required capability to use the patented compound, and whether evidence of UNILAB's capability acquired after filing the petition was admissible. Whether the Director erred in awarding the entire patent to the respondent.
Ruling
The petition for review is denied for lack of merit. The decision of the Court of Appeals affirming the grant of a compulsory license to respondent United Laboratories, Inc. is sustained.
Ratio Decidendi
On the Director's authority to fix terms and conditions: The Director of Patents is authorized under Section 36 of Republic Act No. 165 and Section 35 of P.D. 1263 to fix the terms and conditions of a compulsory license if the parties fail to reach an agreement. This authority was exercised after a hearing and consideration of the evidence. The Court found no abuse of discretion in the Director's determination of the terms, including the royalty rate. On UNILAB's capability and admissibility of evidence: The Court affirmed the Court of Appeals' finding that UNILAB possessed the necessary capability to use the patented compound. Evidence showed UNILAB's extensive experience in drug manufacturing, its possession of necessary equipment and technological expertise, and its maintenance of quality standards. The Court held that the important factor was the proven existence of UNILAB's capability during the hearing of the petition, regardless of whether it was acquired before or after the filing. The patentee's argument that the capability was acquired post-filing was not a bar to the grant of the license. Even if the capability was acquired after filing the petition, its existence during the hearing was sufficient. On the award of the entire patent: The Court found no error in granting a compulsory license over the entire patented invention. The invention relates to aminoalkyl derivatives with histamine H2 blocking activity, and the specific compound ranitidine hydrochloride is covered by the general claim. A license limited to a specific claim would not be fully comprehensive, and the patentees are compensated through royalties.
Main Doctrine
The Director of Patents is authorized to fix the terms and conditions of a compulsory license, including royalty rates, in default of an agreement between the parties, and such determination is subject to judicial review for grave abuse of discretion. A royalty rate of 2.5% of net sales for a compulsory license to use a patented pharmaceutical compound was deemed just and reasonable.