G.R. No. L-22221 - Parke, Davis and Co. vs. Doctor's Pharmaceutical, Inc.

Petitioner Parke, Davis & Company is a foreign corporation organized under Michigan law, U.S.A., owning Letters Patent No. 50 issued by the Philippine Patent Office on February 9, 1950, for a "Process for the Manufacturing of Antibiotics" relating to chloramphenicol.
The patent contains ten claims – nine process claims and one product claim to the chemical substance chloramphenicol.
Respondent Doctors' Pharmaceutical, Inc. is a domestic Philippine corporation with principal office in Caloocan City.

On October 9, 1959, Doctors' Pharmaceuticals requested Parke, Davis & Company for a voluntary license to manufacture, use, and sell medicines containing chloramphenicol under reasonable and mutually satisfactory terms.
Parke, Davis requested information about respondent’s manufacturing facilities; respondent answered that it did not intend to manufacture chloramphenicol itself but use it in its own brand of medicines, basing its license request on the provision of Philippine law allowing compulsory license after three years of patent grant.
Parke, Davis was apparently unwilling to grant a voluntary license.
On March 11, 1960, Doctors' Pharmaceuticals filed a petition with the Director of Patents requesting a compulsory license under Letters Patent No. 50 on these grounds:

The invention relates to medicine and is necessary for public health and safety.
Petitioner is unwilling to grant a voluntary license, causing monopoly and undue restraint on production.
Demand for chloramphenicol medicines is unmet on reasonable terms.
The patented invention is not worked in the Philippines on a commercial scale.

Doctors' Pharmaceuticals prayed to manufacture, use, and sell products containing chloramphenicol and use its own trademarks.

Compulsory license requires the grantee to work the patent, which respondent does not intend to do but only import.
Respondent did not request a license to work the invention in the Philippines.
Respondent is not competent to work the patent.
Granting license would be against public interest and only serve respondent’s monetary interests.
The invention is not necessary for public health and safety.

At hearing on November 14, 1962, Doctors’ Pharmaceuticals abandoned grounds b, c, d, and relied only on ground a that the invention relates to medicine necessary for public health and safety.
After presentation of evidence and memoranda, the Director of Patents issued on November 15, 1963 a decision granting the compulsory license with terms to be agreed upon or fixed by him.

Parke, Davis filed petition for review before the Court of Appeals imputing eleven errors, summarized as:

Respondent failed to prove ground for compulsory license.
Respondent intends only importation, not working the patent.
Petitioner is already working the invention commercially in the Philippines.
Respondent is incompetent to manufacture and sell chloramphenicol.
Granting license is against public interest and serves no legitimate purpose.
Legal theory of compulsory license after three years under Philippine law is erroneous.
Director of Patents cannot issue an order directing petitioner to grant license.
Director erred in not considering petitioner’s affirmative defenses.
The decision ordering compulsory license is erroneous.

Principal issue: Whether the Director of Patents gravely abused discretion in ordering compulsory license under Section 34(d) of Republic Act No. 165 despite petitioner’s objections.

Whether a compulsory license may be granted under Section 34(d) of Republic Act No. 165 to a petitioner who does not intend to work the patent but to manufacture medicinal preparations containing the patented substance.
Whether chloramphenicol as patented invention qualifies as "medicine" and "necessary for public health or safety" justifying compulsory license after three years.
Whether the Director of Patents correctly exercised discretion without grave abuse in granting compulsory license to respondent.
Whether the competencies and intentions of the petitioner/licensee are sufficient grounds to deny compulsory license.
Whether the exclusive rights vested in petitioner as patent owner for 17 years prohibit the grant of compulsory license under such circumstances.
Whether the grant of compulsory license violates public interest or adversely affects petitioner’s rights or local industry.
Whether the Director of Patents can issue an in personam order directing the patentee to grant the license.