Important RulingsRulings

HC allows usage of patented drugs for experimental & research purposes within the country & abroad u/ s 107A of Patent Act

Bayer Corporation vs. Union of India

HC passes an order authorising and legalising the sale, use, construction of patented in terms of Section 107A of the Act for purposes both within the country and abroad; says Bolar exemption is the global community’s thought out design to ensure that the enclosure of intellectual property rights, granted to inventions, does not last beyond the term assured and that the general public is afforded with the end of the bargain which every society guarantees while sealing a patent.

The present judgement decides the two appeals filed by Bayer Corporation and Bayer Intellectual Property GMBH & Anr (Bayer) against Natco and Alembic Chemicals Ltd (Alembic) respectively. Both judgments deal with an identical issue, concerning the correct interpretation of Section 107A of the Patents Act, 1970 (“the Act”) which is commonly known as the ―Bolar provision. 

In the first suit, Bayer filed for injunction against Natco from making, importing, selling, offering for sale “Sorafenib”, “Sorafenib Tosylate” (“Bayer drugs”) or any generic version or any other drug or product thereof which was a subject matter of Bayer’s Patent No.215758. Bayer alleges that when the suit was pending, Natco applied to the Patent Office for grant of compulsory licence against that patent which was granted by the Patent Controller, under Section 84 of the Patents Act 1970 (hereafter “the Act”) and the compulsory licence granted was solely for the purposes of making, using, offering to sell and selling the drug covered by the patent within the territory of India but Natco manufactured the drug for export outside India. Natco next applied for permission to export 1 Kg of Active Pharmaceutical Ingredient (hereafter “API”) Sorafenib to China to conduct clinical studies and trials for development of drug for regulatory purposes which application was rejected by Bayer, which argued that if permission were granted to Natco, it would be contrary to Section 107A and that such a transaction would be a commercial sale and hence, a patent infringement. According to Bayer, Section 107A was not applicable, because Natco was not conducting research and the sale of API, therefore, amounted to infringement of its patent. Bayer’s interpretation of Section107 A was that the provision mentions the word “sale” and also “import”, but the legislature consciously excluded the term “export”. Bayer relied on a German decision Polpharma as well as the US history of the Bolar Exemption (that allows sale only within the United States) and canvassed a restricted – as opposed to a liberal interpretation- of Section107 A.

 The second suit was filed by Bayer to injunct Alembic from making, selling, distributing, advertising, exporting, offering for sale and in any manner directly or indirectly dealing in Rivaroxaban and any product that infringed its (Bayer’s) patent IN 211300 and for ancillary reliefs.

Based on the facts and submissions in the matter, HC makes  its observations.

Interpretation of “sale” and whether it encompasses “exports”

HC opines that “exports” is used in different contexts in Sections 84, 90 and 92A. Section 84 is the provision which enables compulsory licensing of certain conditions. Section 84(7) spells out what are reasonable requirements of the public. These are deemed not to have been satisfied if under Section 84(7)(a)(iii), a market for the patented article manufactured in India is not being supplied or developed. Section 90(1)(vii) is in a sense, complimentary to Section 84 and has to be read with it: it guides the Controller to ensure inter alia that the license granted under Section 84(7)(a)(c)(iii) is with the predominant purpose of supply to the Indian market and that the licensee may also export the patented product. 

HC further opines that Section 92A constitutes an exception to the general rule that compulsory licensing is only resorted primarily and predominantly to cater to the needs of the domestic market of the host country with regard also being had to export potential from that country. HC finds that it cannot be held that the Parliament intended to per se exclude “exports” from the sweep and width of the term “sale” in Section 107A regard being had to the disparate and differing objectives of Sections 84, 90 and 92A all of which in some way or the other primarily deal with compulsory licensing and on the other hand, Section 107A is the only provision that allows an exception to be used- construction and sale of a patented article only for research purposes and subject to fulfillment of the conditions specified therein. HC notices that Section 107A is not made subject to the other provisions of the Act – on the other hand, Section 48, which talks of the rights of a patent holder is subject to other provisions of the Act that includes Section 107A. 

Furthermore, Bayer’s argument that Section 107A constitutes an exception, cannot be accepted. It is an independent provision with a specific history behind it and was subject to intensive Parliamentary debate and scrutiny by a Joint Committee report. Furthermore, it was enacted in response to the TRIPS enabling provision to the member countries to evolve national legislation facilitating research and progress in the fields covered by the patent. HC opines that there is no question of treating Section 107A(a) as an exception to Section 48 and observes that its history of interpretation by TRIPS, the discussion in the Parliamentary Joint Committee Report, all clearly point to its being a special provision that deals with the rights of the patented invention for research purposes.

HC further opines that the interpretation of territoriality by Bayer is strained and artificial and adds that once it is held that patented inventions can be sold for the purpose of carrying on research which fulfils the regulatory requirements of India, there cannot be any bar or an interpretation narrowing the scope of such sale. HC states that it is not possible to dictate the behaviour and legal requirements of other nations by confining the research exception within the territory of India. HC states that it is open that the sale of the article or invention for the purpose of development of information in compliance with the reasonable requirements of developing countries, solely for purposes of research or development falls within Section 107A(a). HC further notes that in the case of sale, construction or use of the patented article, either within India or outside the territory of India, the question of injury to patent owner’s interest cannot ordinarily arise if the object or purpose of that transaction is solely to experiment or research and develop information that is reasonably related to the requirements of the law (Indian or overseas) and rejects Bayer’s arguments. 

Regarding Bayer’s subsidiary submission that Rule 122B of the Drugs and Cosmetics Rules, 1945 permits the licensing authority to grant permission (for a product) on the basis of data available from other countries, HC finds it unpersuasive and states that the broad nature of the provision – which enables development and research of the product and information related thereto, on fulfilling the regulatory or other legal requirements of India, and other countries- cannot be construed narrowly as to permit development and research of the product only in India, even though the backup research is conducted elsewhere. The object and underlying purpose of Drugs and Cosmetics Act is entirely different from those of the Patent Act as the former deals with the range of regulatory provisions necessary for various classes of drugs to receive licensing, marketing approvals etc. while the patent regime is premised solely upon the regulation of the intellectual property right relating to patents.  HC further opines that Natco’s status as compulsory licensee did not place it under any additional statutory bar from exporting the product, as long as the underlying condition in Section 107A was satisfied, as held by the learned Single Judge.

Submissions in respect of the Canada Dispute

Regarding the reliance of Bayer on the case of Canada-Patent Protection of Pharmaceutical Products [DS 114, “Canada Dispute” or “Canada Patent Dispute] decided by the WTO Dispute Settlement Panel (“DSP” hereafter), HC notices that the phraseology of the Canadian provision (Section 55.2.1) is closely similar to Section 107A(a) and finds that the ruling of the DSP assumes significance. hC finds that it is clear that neither the quantity used nor the place of research and development or information (i.e. within the country granting patent or on foreign soil) is per se conclusive that the claim to use the Bolar or research exception by Bayer has to be rejected. HC states that instead, the conduct or action of the individual or entity making, using, constructing or selling the patented product or invention and the purpose for which it sought to be used (i.e. end use and that it should not be commercial) would be important and decisive whether the exporting or purchasing entity intends to use the patented product for commercial purposes.

Tests necessary to regulate the use of the Section 107A exemption

HC finds that the wide nature of reliefs claimed by Bayer in the writ petition,  i.e direct seizure of export consignment, direction to customs authorities to insist on labelling of products to facilitate their seizure and other such reliefs, cannot be granted in a writ proceeding because whether the research provision has been invoked correctly can be determined by an examination of facts and also seeking expert opinion wherever needed. Equally, directing the executive to ensure labelling of the products sought to be exported, cannot be the subject matter of judicial review proceedings. HC further points out that there cannot be an ironclad rule or bright line as to what acts are reasonably related to the use or sale of the product, with the object of using the developed information to satisfy the regulations.

HC observes that Bayer’s claim that the court should have directed the authorities to seize or prohibit quantities of articles which Natco, or someone else sought to export, is not based on any obligation cast upon Customs authorities, in law. Further, HC observes that issuing of blanket directions as sought by Bayer, in its writ petition, is not feasible, because whether such seizure or prohibition or labelling ought to be mandatory, are aspects to be worked out, at the policy level, by the executive government, and not upon the court’s understanding.

HC observes that the approach of the learned single judge in permitting export, without any inquiry and holding that export of 1000 or 2000 tablets constituted reasonable use, in this case, cannot be countenanced. In such case, upon the patent proprietor alleging the infringement was to institute legal proceedings to injunct the alleged exporter or seller, it is equally possible for the seller or exporter to seek a declaration or appropriate relief (including in a suit for groundless threat, if such action lies) that its overseas sales are for research and purposes covered by Section 107A. HC outlines a set of aspects which require to be inquired and adjudicated in such matters.  

HC observes that the history of the Bolar provision highlights that the interest in creativity and progress was not to be undermined by the seemingly wide nature of patent rights; in the context of essential products such as drugs, diagnostic aids, medical devices and other articles, the teachings in the patent necessarily do not lead to its use by the public, upon their lapse to the public domain and to fulfill drug acceptability standards prescribed by regulatory authorities, further tests are to be conducted. The Roche v Bolar decision elicited immediate Congressional response and the Hutch Waxman Act was enacted, in effect, nullifying that decision. TRIPS recognised the need for Bolar like research provisions, enabling research and development in numerous ways which relieve those involved in such activities, of the charge of patent infringement. Therefore, a constricted and narrow textual interpretation of such provisions is not called for.

HC opines that it is necessary for national courts to be aware and cognizant of these obligations, even while considering the assertion of property rights which it has to enforce. HC opines that it is here that the concerned national courts’ constitutional ethos and the values embodied in it also need consideration: whether they can be given primacy or not is to be decided on a case to case, fact dependent basis. Article 47 of the Indian Constitution obliges the State to ensure that the standards of public health of all are ensured and maintained and policies are to be fashioned appropriately. Article 21, which ensures the right to life and liberty, has been interpreted by the Supreme Court as including certain guarantees to health care access. Given these paradigms, an interpretation that furthers the objectives of Section 107A (and the previous research enabling existing in the Patents Act, i.e. Section 47) and Article 30 of TRIPS is to be preferred.

HC opines that the Bolar exemption is the global community’s thought out design to ensure that the enclosure of intellectual property rights, granted to inventions, does not last beyond the term assured and that the general public is afforded with the end of the bargain which every society guarantees while sealing a patent i.e. access to the technology or invention for generations to come.  But for a Bolar exemption, a third party manufacturer would not be able to start experimentation and ready a product, for its availability to the general public after the expiry of the patent term.

HC accordingly passes an order authorizing the sale, use, construction of patented products (by individuals and entities that do not hold patents) in terms of Section 107A of the Act for purposes both within the country and abroad provided the seller ensures that the end use and purpose of sale/export is reasonably related to research and development of information in compliance with regulations or laws of India (or the importing country), for its submission in accordance with such laws and affirms the order of the Single Judge.

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