Bayer Corporation and Ors. v. Union of India and Ors.

Bayer Corporation and Ors. v. Union of India and Ors.

and

Bayer Intellectual Property Gmbh & Anr. v. Alembic Pharmaceuticals Ltd.

2019 (78) PTC 521 (Del); Division Bench

Brief Facts 1: NATCO Dispute

• Bayer Corporation (hereinafter ‘Bayer’) filed a suit for infringement of Patent against Natco.
• During the pendency of the suit, Natco obtained a compulsory license for the same patent.
• The compulsory licence granted was solely for territory of India.
• However, Natco also manufactured the drug for export outside India. (To China)
• Bayer filed a Writ Petition seeking a direction to the Customs Authorities to seize the consignments for export containing products covered by compulsory license.
• The Hon’ble Court gave liberty to Natco to apply for court for permission to export the drug.
• Natco applied for permission to export 1 Kg of Active Pharmaceutical Ingredient to China to conduct clinical studies and trials for regulatory purposes
• As per Bayer, the said act of Natco was infringement of Bayer’s Patent. As per Natco, it was covered by the exemption provided in Section 107A[2] as the export was for regulatory purposes.
• Bayer’s counter argument was that Section 107A does not include the word ‘Export’ and hence will not be applicable. Further, Natco’s acts were not for research purposes.
• Natco further argued that ‘sale’ for the purpose of drug development i.e. “solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product” clearly pointed to the legislative intention that exports, for the purpose of drug development, in compliance of regulatory law of a country outside India was permissible.

Brief Facts 2: ALEMBIC Dispute

• Bayer IP GmBH had filed a suit against Alembic towards patent infringement of its product Rivaroxaban.
• Alembic raised the defence of Section 107A and stated that there is no commercial launch of the product but only export within the meaning of Section 107A.
• As per Bayer, Alembic had exported 90 kgs of Rivaroxaban worth 3 Crores and such quantity could not be for the purposes provided in Section 107A.

Question of Law Involved:

Whether the word ‘selling’ under Section 107A (a) means ‘selling in India’ only or also means ‘selling outside India’ so as to include ‘exports’ within its ambit.

Decision by the Learned Single Judge

As the question of law was similar, both the matters were decided by the Learned Single Judge and disposed off vide common order dated 8^th March, 2017. The Learned Single Judge rejected the contention of Bayer in both the matters. Some of the observations of the Learned Singe Judge are as follows:

• The intention of the legislature in interpreting Section 107 must be gathered from the plain meaning, which clearly does not exclude sale outside India.
• The only requirement is – sale must be “reasonably related to” the submission of information under the law (foreign law).
• It is thus the purpose for which the said acts are done which distinguishes, whether the acts constitute infringement of patent or not. If the said purpose is within Section 107A, the acts so done aren’t infringement.
• As far as Section 107A is concerned, use therein of the words “law for the time being in force, in a country other than India” is evidence of, obtaining regulatory approvals in countries other than India being contemplated by the legislature. With such contemplation, the legislature provided that certain acts mentioned in Section 107A, required to be done for the purpose of obtaining such approval, would not be considered as infringement of patent rights. One of such acts is of selling of patented invention.

The Court found Alembic and Natco’s to be within the contours of Section 107A. Aggrieved by the said order, Bayer filed an LPA (against Writ Petition) and RFA (against the suit). Both the matters were heard together.

Contentions of Parties in Appeal

Bayer:

• Section 107A is an exception to Section 48 (exclusive rights of Patentee) and does not confer a right. (Para 12)
• Section 107A is intended to be used as a defence in a suit for infringement rather than an independent right or separate actionable claim. (Para 12)
• Intent behind Section 107A is only to ensure the availability of a competitor’s product immediately after the expiry of patent in the Indian market without having to wait for regulatory approval post patent expiry. However, this intent does not extend to ensuring the availability of the same in other countries. (Para 14)
• The phrase “in a country other than India” refers to the submission of information in other countries so that the data generated in India may be submitted therein, an accepted practice in the pharmaceutical industry. (Para 14)
• The expression “exports” occurs in various provisions of the Act such as 84, 90 and 92 but not in 107A. This shows that the legislature has consciously used the expression “export” whenever it was necessary. (Para 15)
• The term “importing” was specifically included in Section 107A. This clearly indicates that the legislature did not intend to include “exports” within ambit of the Section. Inclusion of “importing” also reinforces the legislative intent to ensure the availability of the drug in the Indian market. (Para 15)
• Word “selling” does not include exports, as the Act is territorial in nature and explicitly states in Section 1 that it “extends to the whole of India”. Clearly, the Act only seeks to regulate activities which take place in India and hence, does not deal with/permit sale outside India. (Para 16)
• The nature/purpose of the Act is primarily to safeguard patentee and Section 107A is an exception so that the generic versions of the drug may be made available immediately upon expiry in the Indian market. (Para 16)
• Act of selling in Section 48 refers to sale “in India” Thus Section 107A, cannot enlarge the scope of this term and grant an additional right to the Defendant. (Para 17)
• Section must be read in accord with global standards on Bolar Exemption. Joint Parliamentary Committee[3] Report clarifies that Section 107A was meant to be in line with the global standards. Export under Section 107A would violate Article 30[4] of the TRIPS which allows for exceptions to patent rights so long as the exception is (a) limited; (b) does not unreasonably conflict with the normal exploitation of the patent; and (c) does not unreasonably prejudice the legitimate interests of the patentee. It is pertinent to note that these were the very issues that were considered in the case of Canada-Patent Protection of Pharmaceutical Products[5]. WTO upheld the validity of the Bolar exemption, it did not consider whether an export would be permissible within the ambit of this exception. In fact, Canada’s contentions with respect to the issue of submission of information before foreign regulatory regimes clearly indicates that the Canadian provision envisioned the testing itself to be carried out domestically while the information generated therefrom could be used for submission abroad. (Para 21)
• Article 31 (f) of TRIPS states that any use of a non-patentee should be predominantly for the supply of the domestic market. (Para 21)
• Learned Single Judge failed to even consider the quantities sought to be exported. This is crucial in confirming the purpose for which the non-patentee is undertaking the export. In the present case, more than 90 kgs of the patented product has been exported. (Para 27)

Natco:

• Chinese law does not permit any non-Chinese entity to submit regulatory dossiers based on data generated in any other country. Similar laws exist globally. The studies are to be conducted in China by a Chinese entity and hence export of product is necessary and in line with Section 107A. (Para 28)
• Section 107A is enacted pursuant to Article 30 of TRIPS and after the decision of the WTO[6] in Canada dispute. Section 107A considers the unique position of the Indian pharmaceutical industry in the International Market. Therefore, it goes beyond the Canadian provision in this behalf. (Para 29)
• Rights under Section 48 are subject to the acts exempted under Section 107A. (Para 30)
• Section 55.2 of the Canada Patent Law which was upheld in the Canada Dispute is slightly different from Section 107A of the Patents Act, 1970.
  • The former only contemplates “development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product”. (Emphasis Supplied)
  • However, Section 107A, contemplates: “… Development and submission of information required under any law for the time being in force… In a country other than India, that regulates the manufacture, construction, use, sale or import of any product.” (Emphasis Supplied)
  • Hence, Section 107A recognizes that export to another country for development and submission of information (in that country), is not infringement. (Para 33)
• The key is not the quantity but the purpose for which production is carried so long as the production is confined to comply with the requirements of the regulatory approval process. (Para 33)
• It is an established position in law that any term in a provision should be given plain meaning and thus selling for purpose of regulatory approvals abroad includes exports. (Para 37)

Alembic:

• Placement of Section 107A, distinct from Section 107 demonstrates that is it not a defence to Section 48 but independent Section. (Para 42)
• Section 48 is subject to other provisions of the Act, including Section 107A. (Para 43)
• The plain words of the statute itself provides for acts to be conducted outside India. Bayer’s interpretation, however, would result in a dichotomy whereby the term ‘selling’ would be interpreted as the selling of the ‘product’ itself in India, but for the purposes of seeking regulatory approvals outside India, it would be interpreted as selling of ‘information’. Such dichotomy was never the intention of the legislature. (Para 45)
• The countries which do not allow for Exports of patented products for regulatory approvals have a specific bar in their Statute. No such bar exists in the Patents Act, 1970. (Para 46)
• Bayer’s reliance on the ‘Notes on Clause’ of the Patents (Second amendment) Bill, 1999 is wrong as JPC made numerous changes to the provision enacted finally. Thus, scope of the Section was expanded beyond India and the limitation of only the Indian market were specifically removed. (Para 47)
• A look at Section 107A reveals that it does not impose any restriction on the quantity which can be made, as long as all such quantity is utilized solely for development and submission of information. Different countries have different regulatory regimes and requirements whereby the data required varies from region to region based on local testing. (Para 48)

Discussion by the Division Bench

On emergence of Research Exemption Globally (Paras 51 to 67)

• The Hon’ble Court perused the history of the research exemption in various countries. It perused, inter alia, the case of Roche Products, Inc. v. Bolar Pharmaceutical Co.[7], from which the exemption takes its name.
• After detailed perusal of the emergence of the research exemption, the Hon’ble Court held that the course of the experimental exception both before and after the TRIPS has shown the adoption, generally of a broad approach, to permit use of all kinds as long as it does not have any primary commercial undertones.

1. Legislative history of Section 107A (Paras 68 to 77)

• JPC recommended introduction of Bolar exemption to ensure prompt availability of products, particularly generic drugs, immediately after the expiry of the term of the patent and stated that the clause 51[8] has been made to make a provision in consonance with the Bolar Provisions at the global level.
• The notes on Clauses amending the Act, through the bill stated that the provision is proposed to ensure that generic drug should be available in Indian market immediately after the expiry of the term of patents.
• Patents (Second Amendment) Bill, 1999 intended insertion of a provision as Bolar exemption[9]
• The Statement of Objects and Reasons of the Patents Amendment Act of 2002 stated that one of the salient feature of the bill was to make a provision enabling persons other than patent holder to obtain marketing approval from the appropriate regulatory authorities within three years before the expiration of the term of the patent.
• Eventually, the Patents Amendment Act of 2002 added the following provision in the Patents Act, 1970 as Bolar exemption:

“A: For the purposes of this Act

• Any act of making, constructing, using or selling a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India or in a country other than India, that regulates the manufacture, construction, use or sale of any product”
• Subsequently, by way of Patents Amendment Act of 2005 the word “importing” was also added to Section 107A.
• After analyzing the above, the Division Bench observed that these stages in the amendment of the Act and the introduction of India’s Bolar exemption demonstrate that Parliament took a careful and nuanced view of the matter and it also had the benefit of provisions enacted in other countries.

Interpretation of “sale” and whether it encompasses “exports” (Paras 78 to 95)

• While interpreting a provision, plain and natural meaning should be preferred ordinarily, and two, that the context and purpose of the provision should always be kept in mind.
• The term “exports” is used in different contexts in Sections 84, 90 and 92A.
• Having regard to all these factors, 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 use the Patent for research purposes and subject to fulfillment of the conditions specified therein.
• Section 48 is subject to other provisions of the Act that includes Section 107A.
• Section 107A is not an exception but an independent provision with a specific history; was subject to intensive Parliamentary debate and scrutiny. Furthermore, it was enacted in response to the TRIPS enabling provision to the member countries to evolve national legislation facilitating research and progress in fields covered by the patents.
• National regimes might insist that such research and experimentation in regard to those aspects be either entirely or at least in part be carried on in their territory.
• The Court after the above discussion held that the expression the “making, constructing, using, selling or importing patented articles solely for uses reasonably related to development and submission of information required under any law for the time being in force…… or in a country other than India that regulates the manufacturing, construction, use, sale or import of any product”, consequently, has to be given a wide import.
• The Hon’ble Court observed that Bayer’s contention of impermissibility of “exports” in Section 107A is wrong.

Perusal of the Canada Dispute and Resultant Conclusion from the same. (Paras 96 to 105)

Neither the quantity used nor the place of R & D (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 has to be rejected.  What is relevant is the 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.

Tests necessary to regulate the use of the Section 107A exemption (Paras 106 to 111)

• An unregulated export activity can result in exploitation of the Bolar exemption beyond what can be considered “reasonably” related to obtaining approval under laws of India or another country.
• The directions as sought by Bayer, towards seizure by customs 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 labeling of the products sought to be exported, cannot be the subject matter of judicial review.
• That brings the question to what is use, sale, etc “reasonably related” for regulatory processes?
• There cannot be an ironclad rule.
• The Canada dispute instructs that the volume of use of a patented invention is itself inconclusive on the issue.
• Thus, the volume of the patented product and its use for R & D cannot be prescribed by any one norm. Each case merits an analysis of the evidence, the proof regarding the regulatory concerns is to be based on it. At the same time, this cannot be short circuited by approaching and seeking relief under Article 226 of the Constitution.
• The approach of 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 admitted to be acceptable.
• The Hon’ble Division Bench stated that the inquiry and adjudication in such cases would be in regard to the following indicative but not exhaustive matters:

(1) The patent granted;

(2) The nature of the product or elements sought to be exported;

(3) The details of the party or party importing the product;

(4) The quantity sought to be exported;

(5) Other particulars with respect to the end use of the product, to establish that it is solely for research and development of information to regulatory authorities in the other country;

(6) All particulars regarding the relevant regulations, covering the kind and scope of inquiry, including the quantities of the product (i.e. the patented product or compound, API or fine chemical needed). These details must be supplied by the exporter/seller of the product to the overseas buyer. In case the Defendant is not the seller, it should disclose who had purchased the product in the relevant quantities, to facilitate its impleadment in the proceedings. In the event it cannot do so, the consequences of such result ought to be considered by the court.

(7) If the regulations are native language, an authentic English translation;

(8) Appropriate interim order, including undertaking by way of affidavit to compensate the Plaintiff, in the event the suit were to be decreed and the extent of such monetary compensation. The affidavit should be of an authorized personnel, and kept alive during the pendency of litigation, duly authenticated by the board of director or other controlling body of the defendant-and whenever the company or entity undergoes amalgamation or transfer, suitable undertaking from the successor organization;

(9) If necessary, verification through the Indian mission (and its trade division) abroad regarding the authentication of the third party and/or its facilities abroad.

(10) If it is held by the court that the exporter is not involved in sale or export of any patented product, but a generic article, unprotected by patent law, when denying relief, suitable restitutionary relief should be awarded to the defendants in monetary terms, to preclude litigation that prevents trade or competition.

Postscript[10] (Paras 112 to 119)

• TRIPS mentions as an objective the need to balance IP rights. Doha declaration recognizes the need for all people to benefit from gains from IP rights. History of Bolar provision shows that interest in progress was not to be undermined by Patent rights. For essential products, regulatory tests have to bd conducted. The Roche v. Bolar[11] decision lead to the Hutch Waxman Act. TRIPS also recognize the need for Bolar provision. Thus, a narrow interpretation is not warranted.
• World Health Organisation in 1946 recognised that enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being. Later ICESCR[12] requires members to attain high standards of health amd take steps to ensure reduction of still birth rate and infant mortality rate, prevention of epidemic, endemic, occupational and other diseased etc.
• 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.
• 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.

Ultimate Decision and Directions (Paras 119 and 120)

• 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 is authorized and legal 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. The impugned judgment of the Learned Single Judge and the findings recorded on this aspect are accordingly affirmed.
• A dispute about the sale, i.e. whether it is legitimately related to the reasonable end use or purpose of research etc. for submission of information is properly the subject matter of a civil suit in which the full range of reliefs available in law can be granted having regard to the circumstances and the evidence led;
• The court trying the suit would suitably take into account the factors that need to be examined (which are elaborated in the previous part of this judgment) and other relevant factors;
• Such disputes are not ordinarily the subject of public law proceedings, as they involve investigation into facts and also result in reliefs to private parties for enforcement of private property entitlements. Therefore, such
• Disputes should not be the subject matter of writ proceedings; petitions under Article 226 of the Constitution of India should not be entertained and wherever filed, the parties should be relegated to civil remedies.
• The suits by parties shall be decided in accordance with law, keeping in mind the discussion in this judgment and the factors indicated above.

Thus, the LPA was dismissed and the RFA was allowed, subject to the above mentioned directions.

[1] Subsequently, referred as Alembic.

[2] 107A. Certain acts not to be considered as infringement.—For the purposes of this Act,— (a) any act of making, constructing, using, selling or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product; (b) importation of patented products by any person from a person who is duly authorised under the law to produce and sell or distribute the product, shall not be considered as a infringement of patent rights.

[3] Hereinafter referred to as ‘JPC’

[4] Article 30 – Exceptions to Rights Conferred – Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.

[5] Hereinafter referred to as ‘Canada Dispute’

[6] World Trade Organisation

[7] 733 F.2d 858 (Fed. Cir. 1984) – In the said case, the district court held that limited use of a patented drug for testing for FDA drug approval during the last 6 months of a patent’s is not infringement. The decision was reversed in appeal. However, the decision laid to enactment of law  permitting use of patented products in experiments for FDA approval.

[8] Which was to be the amendment qua Bolar exemption.

[9] 107A For the purposes of this Act,- (a) Any act of making or using a patented invention within three years before the expiry of the term of the patent by any person for the purpose of development and submission of the information to any regulatory authority responsible for grant of marketing approval for the product of invention.

[10] An extra message added at the end of story or letter.

[11] Supra note 8

[12] International Covenant on Economic, Social and Cultural Rights