Bayer Corporation v. Union of India & Ors.

 Bayer Corporation v. Union of India & Ors.

2014 (60) PTC 277 (Bom)

BRIEF FACTS:

• The Petitioner had filed the present petition[1] being aggrieved by the order of the Hon’ble Intellectual Property Appellate Board (hereinafter ‘IPAB’) dated 4^th March, 2013 vide which IPAB upheld the order of the Controller of Patents dated 9^th March, 2012 granting Compulsory License[2] to one Natco Pharmaceuticals Ltd. (hereinafter ‘Natco’) under Section 84 of the Patents Act, 1970 (hereinafter ‘Act’) for patented drug sorafenib tosylate. (hereinafter ‘patented drug’).
• Petitioner was a US based Corporation which developed the patented drug to be used for treatments of patients suffering from Kidney Cancer. The patented drug performed the function of relieving the plain and also to slow down the spread of cancer.
• On 3^rd March, 2008, the Petitioner was granted a Patent for the patented drug in India.
• On 6^th December, 2010, Natco approached the Petitioner for grant of voluntary license for manufacturing and selling the patented drug and proposed to sell the drug at Rs. 10,000/- (Rupees Ten Thousand) per month as against the price of Rs. 2,80,428/- (Two Lakh Eighty Thousand and Four Hundred and Twenty Eight) charged by Petitioner.
• On 27^th December, 2010, Petitioner rejected Natco’s offer for voluntary license and gave Natco 14 days in the event Natco had anything to add further.
• On 29^th July, 2011, few months after the expiry of three years from 3^rd March 2008, Natco applied to the Controller of Patents for grant of Compulsory License under Section 84(1)[3].

Proceedings before Controller and grant of Compulsory License on 9^th March, 2012

• Natco submitted that in respect of the patent all the conditions as mentioned in Section 84(1) of the Patents Act, 1970 have been satisfied.
• Natco proposed that it will sell the patented drug at Rs. 8800/- per month of therapy.
• On 9^th March, 2012 the Controller granted a non-exclusive, non-assignable compulsory license to Natco to manufacture and sell the patented drug and pay a royalty @ 6 % of its net sales to Petitioner till the term of the Patent.

Proceedings before IPAB

• IPAB upheld the order of the grant of Compulsory License passed by the Controller.
• However, it increased the rate of royalty to 7 % and disagreed with the view of the Controller on the aspect that working in India as contemplated under Section 84 (1) (c) would only be satisfied if patented drug is manufactured in India.
• As per IPAB, the same could be satisfied by importing the patented drug in India.

PROCEEDINGS BEFORE BOMBAY HIGH COURT:

Petitioner’s Contentions:

• The condition precedent to an application under Section 84 (1) is that the Applicant should make efforts to obtain voluntary license under Section 84 (6) (iv)[4] on reasonable terms. The communication dated 6^th December, 2010 does not indicate any efforts made by Natco.
• The Petitioner does not fall within the ambit of Section 84 (1)(a)[5] for the reason that reasonable requirement of public with respect to patented drug was being satisfied by Petitioner. This is because the ‘public’ in case of the patented drug is much smaller than all the patients in India. Further, apart from the Petitioner, entities such as Cipla and Natco as infringers are also providing the quantity of the patented which should be considered to determine whether reasonable requirements of public are satisfied are not.
• The drug is available at reasonable affordable price for the following reasons:
  • Cost of inventing the drug is high and the same has also to factor in cost of failed drug.
  • The Petitioner has invested a huge amount on Research and Development.
  • The teat of reasonable process has to be determined in keeping the class of public.
  • Petitioner has a concept of differential pricing where poor patients only pay for 3 days’ medicine and the rest 27 days’ medicine in the month is free. This is under Petitioner’s Patient Assistance Programme. (PAP).
• Patent has worked in India by way of import and ‘working’ does not mean working in India to full extent; Even initial working would be sufficient for Section 84 (1) (c)[6].
• Controller has ignored the mandatory nature of Section 90 (1) (i)[7] of the Act as it has not taken into account the cost of invention incurred by the Petitioner while fixing the royalties.

Respondent No. 3’s Contentions (Natco):

• Letter of 10^th December, 2010 demonstrates efforts were made to obtain voluntary license.
• Petitioner makes available the patented drug at about Rs. 2,80,000/- per month of treatment. Cipla sells it for Rs. 30,000/- for same duration. This is not affordable in Indian context.
• Charitable programme of Petitioner is discretionary and conditional. Thus, cannot be applied for ‘public’ as mentioned in the provision. Thus, patented drug was not available to ‘public’ at reasonably affordable price.
• Worked in India in Section 84(1)(c) means worked on commercial scale, not token working.
• Section 90 has been complied by IPAB as the royalty has been enhanced from 6% to 7%.

Submissions of Union of India:

• The terms ‘worked in the territory of India’ under Section 84 (1) (c) means manufactured in India on a commercial scale. This is evident from factors enumerated under Section 83 of the Act which provides, inter alia, for transfer of technology and a direction to ensure that patent holder should not monopolise the patent only for importation.
• Patented drug has not been worked in India. Thus, Impugned order calls for non- interference.

DECISION & FINDINGS OF THE BOMBAY HIGH COURT

Generally – On Law of Patents

• Objective in the grant of patent is the obligation of the patent holder to utilize the invention to meet the needs of the society for use and research.
• To prevent abuse of the patent, Paris Convention provided that if the patented invention is not being worked sufficiently then the member can provide for legislative measures to ensure due working.
• Objective of TRIPS is for protection and promotion of Intellectual Property as well as transfer of technology to the advantage of producers and user.
• Doha Declaration provided that flexibilities to member countries would include the Right to grant compulsory license and the grounds upon which it is to be granted.
• India is a signatory to the said Treaties and thus Municipal law has to be necessarily construed in consonance with International Treaties to which India is a party.

On the issue as to whether the Applicant (Natco) made efforts to obtain voluntary license?

• Answered in Affirmative.
• Petitioner’s response dated 27^th December, 2010 to Natco’s request for a Voluntary license very clearly records its refusal to grant voluntary license.

On the issue as to whether the reasonable requirements of the public have been satisfied? [Section 84 (1) (a)]

• Answered in Negative.
• The reasonable requirement of the public has to be considered by the authorities in the context of number of patients requiring the patented drug.
• As per the documents provided by the Petitioner itself, an aggregate of 8853 patients will require the patented drug. As against this, Petitioner has sold only 593 boxed and thus has catered to only 200 patients. Further, Cipla has only provided 4686 packets.
• These figures do not meet the annual requirements of patients and thus reasonable requirement of the public with regard to the patented drug has not been satisfied.

On the issue as to whether the supplies by infringers of the patented drug are to be taken into account to determine the satisfaction of the reasonable requirement test?

Only where the patent holder accepts the infringer’s participation in the market and in fact grants him de facto license could the infringer’s supplies be taken into account. In the present case, as there already exists a pending suit by the Petitioner against Cipla, wherein injunction can be granted anytime, supplies by infringers cannot be considered.

On the issue as to what is the meaning to be given to the words “adequate extent” under Section 84 (7)[8]?

• In case of pharmaceuticals, ‘adequate extent’ means fullest extent and the term will have varying interpretation dependant on article to article.
• This would also be in line with Doha Declaration 2001 which reiterates flexibility to member countries so as to ensure access to medicines for all.

On the issue as to whether the patented drug available to the general public at reasonably affordable price?

• Answered in Negative.
• Act does not bestow authorities with power of investigations in regard to reasonably affordable price. Same has to be arrived through evidence of parties of their respective prices.
• Obligation of the authorities under the Act is qua grant, control and revocation of patent and not price determination. It is for this reason that Section 90(1)(iii)[9] of the Act does not direct the Controller to fix the reasonably affordable price but only directs the Controller to endeavor to ensure/secure the patented article is available at reasonably affordable prices.
• Reasonably affordable price has to be determined on the basis of relative prices being offered by the patentee and the applicant. In such a case, the reasonably affordable price has to necessarily be the price of the applicant as it by itself establishes that the price of the Petitioner is not reasonably affordable price.
• Petitioner has not made available anywhere the quantum of reimbursement received.
• An adverse inference, must necessarily be drawn. Further, Section 90(1) requires that only the expenditure incurred for research and development on the patented drug to be included for considering the terms and conditions of the Compulsory License. These figures have not been produced by the Petitioner. Thus, no fault in the impugned order holding that the patented drug is not available at a reasonably affordable price.
• Differential pricing argument of the Petitioner under the PAP programme cannot be considered as it is based on condition and discretion imposed by the Petitioner. Thus, the patented drug in ordinary course is not available to public at a reasonably affordable price.
• Further, the concept of differential pricing can apply to Section 84 (1)(a) to determine satisfaction of reasonable requirement of public but not to a situation under Section 84 (1) (b). This is for the reason that as per Section 84 (7) (ii)[10] apart from availability the patent holder also has to satisfy that the same is available on reasonable terms, such as price. Therefore, the argument raised on basis of differential pricing can apply to a situation of Section 84 (1) (a) but not to Section 84 (1) (b).

On the issue as to whether the Patented Drug has been worked in the territory of India?

• Answered in Negative.
• The contention of Union of India is essential in India is incorrect as ‘worked in the territory of India’ can also be done through other means, including Import.
• This determination of ‘working in India’ has to be done on a case to case basis as rightly held by IPAB but mere manufacturing not being in India cannot be a sole factor.
• It is important for the Patent holder to satisfy as to why patented invention was not being manufactured in India keeping in view Section 83[11] of the Act. If the Patent holder is able to satisfy the authorities, the ‘working’ condition can be met by Import.

On the Terms & Conditions for grant of compulsory license

• Terms of the Compulsory License in the Impugned Order upheld.
• The Petitioner has not been able to show how the royalty fixed at 7% is inadequate.
• Petitioner has led no evidence of the cost incurred by it to develop the patented drug.
• Thus, there is no reason to interfere with the rate of royalty as already fixed.

Consequently, the Writ Petition was dismissed. The Petitioner did file a SLP before the Hon’ble Supreme Court of India, challenging the present decision. However, the Hon’ble Supreme Court did not interfere with the present decision and dismissed the SLP vide order dated 12^th December, 2014[12].

[1] Writ Petition No. 1323 of 2013 before the Hon’ble High Court of Bombay

[2] Compulsory licensing is when a government allows someone else to produce a patented product or process without the consent of the patent owner or plans to use the patent-protected invention itself. It is one of the flexibilities in the field of patent protection included in the WTO’s agreement on intellectual property — the TRIPS, Compulsory licensing of pharmaceuticals and TRIPS, TRIPS and health: frequently asked questions, available at: https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm  (Visited on 8^th April, 2020)

[3] Section 84 – Compulsory licences:-(1) At any time after the expiration of three years from the date of the grant of a patent, any person interested may make an application to the Controller for grant of compulsory licence on patent on any of the following grounds, namely:-

(a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or

(b) that the patented invention is not available to the public at a reasonably affordable price, or

(c) that the patented invention is not worked in the territory of India.

[4] Section 84 (6) – In considering the application field under this section, the Controller shall take into account,– (iv) as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit:

[5] Supra note 2

[6] Ibid.

[7] Section 90 (1) (i) -Terms and conditions of compulsory licences –  (1) In settling the terms and conditions of a licence under section 84, the Controller shall endeavor to secure- (i) that the royalty and other remuneration, if any, reserved to the patentee or other person beneficially entitled to the patent, is reasonable, having regard to the nature of the invention, the expenditure incurred by the patentee in making the invention or in developing it and obtaining a patent and keeping it in force and other relevant factors;

[8] Section 84 (7) – For the purposes of this Chapter, the reasonable requirements of the public shall be deemed not to have been satisfied – (ii) the demand for the patented article has not been met to an adequate extent or on reasonable terms

[9] Section 90 (1) (iii)  – In settling the terms and conditions of a license under section 84, the Controller shall endeavor to secure– (iii) that the patented articles are made available to the public at reasonably affordable prices;

[10] Supra Note 7

[11] Section 83 – General principles applicable to working of patented inventions:- Without prejudice to the other provisions contained in this Act, in exercising the powers conferred by this Chapter, regard shall be had to the following general considerations, namely;–

1. that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay;
2. that they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article;
3. that the protection and enforcement of patent rights contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations;

[12] SLP (C) No. 30145 of 2014 before the Hon’ble Supreme Court of India