Bayer’s woes with compulsory licences

25-04-2017

Mohan Dewan

Bayer’s woes with the Indian legal system are far from over. In 2011, the pharmaceutical company filed a suit to restrain India-based generic maker Natco from making, importing, selling or offering for sale cancer treatment drug sorafenib, sorafenib tosylate or any other generic version.

During the pendency of this suit, Natco approached the Indian patent controller for the grant of a compulsory licence for sorafenib and sorafenib tosylate.

The following year, the patent controller granted Natco a compulsory licence to patent number 215758 (sorafenib).

In 2014 Bayer obtained an order holding that consignments from India containing Sorafenat, Natco’s version of sorafenib, could not be exported.

Natco submitted that it had the required drug licences and consent of Bayer’s counsel to export the drugs in no more than 15mg quantities for clinical studies.

Natco again applied for a licence to allow the export of 1kg of the drug to China for clinical studies and trials. This was then contested by Bayer.

Bayer had also instituted a suit against Alembic Pharmaceuticals, claiming that it had exported 90kg of the drug to Brazil and Palestine.

Bayer’s counsel submitted that section 107A of the Patents Act 1970 did not contemplate the export of products. Bayer argued that section 107A envisages that the patented invention can be used only in India for conducting trials and that the regulatory information generated from the said trials can be given to the concerned authorities in a country other than India.

Bayer also argued that the rights under section 107A stemmed from section 84(4) of the Patents Act and that the word “selling” under section 107A referred to the sale of the drugs in India alone—and did not include the export of such drugs.

These arguments were countered by Natco’s counsel who argued that the drugs were exported to China solely for research and development and that the regulatory regime in China requires clinical trials to be conducted in that country.

Natco’s counsel also argued that the company didn’t have any commercial reason to export the drugs.

Bayer’s counsel alleged that experimentation, and research and development into the patented product was prohibited as it would lead to commercial exploitation.

"Bayer’s counsel submitted that section 107A of the Patents Act 1970 did not contemplate the export of products."

 Interpretation of statute

Delhi High Court Justice Endlaw said that agreeing with Bayer’s counsel on the interpretation of section 107A would be contrary to the textual interpretation of the section.

He ruled that TRIPS Agreement provisions allow each member country to carve exceptions to patent rights.

It was held that even if article 31(f) of TRIPS permits only the domestic operation of the research exemption, the legislature of a country was still entitled to decide whether export of patented articles under section 107A would be permissible.

Endlaw also found that the fact there were no provisions to regulate the export of patented drug did not imply in itself that such activity is barred under section 107A.

Bayer’s counsel also argued that since Natco had obtained compulsory licences under section 84, it could use the benefits of section 107A, which applies to non-patentees.

It was held that the condition of a compulsory licence is for making, using, and selling the drug covered by the patent within India.

However, the court said, the purpose of sale under section 107A is only for obtaining the regulatory approvals under the laws of India or in a country other than India.

Therefore, it ruled that a compulsory licence would not bar Natco from acting under section 107A.

The judgment, although well-meaning, allows room for misuse.

The act of exporting patented drugs to other countries is contrary to the interest of patentees, meaning that patentees will have to be vigilant about their rights in countries where the drugs are being exported.

Although initially drugs are exported from India to other countries for research purposes, once the patented drug is in another territory, the legal action against infringement (if any) will have to be brought in the other country because patents are territorial rights.

The judgment doesn’t put a limit on the amount of a drug that can be exported in a single transaction, as in this case where Natco exported 1kg of the drug to China and Alembic exported 90kg to Brazil and Palestine.

It is true that the judiciary cannot legislate, but the judiciary can ensure appropriate checks and balances in the system to prevent misuse.

It is quite possible that Bayer may appeal against this judgment.

Mohan Dewan is principal of R K Dewan & Co. He can be contacted at: dewan@rkdewanmail.com 

Mohan Dewan, R K Dewan & Co, India, Indian patent controller, Natco, patent, Bayer, Alembic Pharmaceuticals, section 107A, compulsory licence,

WIPR