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Citation – 2013 Indlaw IP AB 20
Facts: The petitioner (Bayer) is a corporation incorporated under the laws of United State of America (U.S.A.). Subsequent to its research and development (R & D) activities, the petitioner invented and developed its patented drug to enable its administration to human beings. The patented drug is used in the treatment of patients suffering from Kidney cancer i.e. Renal Cell Carcinoma (RCC) and liver cancer i.e. Hepatocellular Carcinoma (HCC). The aforesaid patented drug acts more as a palliative i.e. relieves patients from pain and to an extent also slows down the spread of cancer by restricting the speed with which the cancer cells grow. Bayer Corp. had acquired the patent for the salt/compound Sorafenib Tosylate in 2008 in India. The market name of the medicine/drug was Nexavar.
Natco, a drug manufacturer in India, approached the petitioner for grant of voluntary license for the purpose of manufacturing and selling the patented drug in India. The respondent (Natco) sought a voluntary license to manufacture and sell in India the patented drug under its brand name at a price of less than Rs. 10,000 per month of therapy as against the price of Rs. 2,80,428 per month of therapy charged by the petitioner. The purpose behind obtaining the voluntary licence by Natco was to make the patented drug accessible to the public at an affordable price. When applying for the voluntary license, Natco also stated the fact that the petitioner had neither met the reasonable requirement of public nor was it reasonably priced nor had it worked in the territory of India. Eventually, the petitioner rejected Natco’s application for grant of voluntary license.
Thereafter, on 29 July, 2011 i.e. after the expiry of three years from 3 March, 2008, Natco applied to the Controller for a grant of Compulsory License under Section 84 (1) of the Act. In its application, Natco pointed out that all the three conditions for the grant of Compulsory License were fulfilled/satisfied. It was also set down that they proposed to sell the patented drug under their brand name (Nexavar) at Rs. 8,800 per month of therapy. On 9 March, 2012 the Controller via his order gave authorization to Natco to manufacture and sell the patented drug and directed to pay to the petitioner royalty at 6% of its net sales of the patented drug under its brand name which was allowed to be sold at the price of Rs. 8,800 for 120 tablets for a month of treatment. Besides, the grant of Compulsory License to Natco was non-exclusive, non-assignable and for the balance term of the patent.
Issue: Whether a compulsory license can be granted in favour of Natco for the production of the patented drug?
Law Involved: What is a compulsory License?
Section 84(1) of the Patents Act allows any interested person to make an application to the Controller for the grant of Compulsory License after the expiry of three years from the date of grant of patent on any of the following grounds:
a) That the reasonable requirements of public with respect to the patented invention have not been satisfied
b) That the patented invention is not available to the public at reasonably affordable price
c) That the patented invention is not worked in India.
Discussion/Rationale:
a) Did the applicant (Natco) make efforts to obtain voluntary licence from the patent holder (Bayer)?
The first condition precedent to consider an application for compulsory license is that three years should have elapsed from the grant of the patent. The petitioner urges that the second condition precedent to entertain the application viz making efforts to obtain voluntary license from the patent holder on reasonable terms and conditions as mandated by Section 84 (6) of the Act has not been satisfied i.e. the applicant has not made efforts. On the basis of examination of evidence i.e. exchange of letters between the parties in the context of Section 84 (6) of the Act, both the authorities concluded that effort was made by Natco to obtain the voluntary license. The Court said that it found no reason to interfere with the findings of the authorities under the Act and held that the second condition precedent for consideration of application for compulsory license namely an effort to obtain a voluntary license has been satisfied by Natco.
b) Have the reasonable requirements of the public been satisfied?
The Court held that in the scheme of the Act it for the applicant while filing an application for Compulsory License in terms of Section 87 of the Act to make out a prima facie case that one or all the grounds stated in Section 84 (1) of the Act are prima facie attracted/applicable in respect of a patent for which the Compulsory License is sought. The petitioner then submitted that the reasonable requirement of the public has to be considered by the authorities in the context of number of patients requiring the patented drug. It is submitted by the petitioner that it is not in every case that a person suffering from HCC or RCC Cancer is required to be administered the patented drug. The occasion to administer the patented drug arises only during the last stages of a patient’s illness and even in that case the Doctor may opt for a line of treatment requiring measures other than the intake of the patented drug. The Court held that the aforesaid exercise can never be carried out on a mathematical basis. It has to be on a broad basis and this broad exercise has been done on the basis of the evidence produced by the parties. In fact, authorities under the Act have considered the rival statistics of the patients before it and on that basis determined the reasonable requirement of the public.
c) Whether the supplies by infringers of the patented drug is to be considered/taken into account to determine the satisfaction of the reasonable requirement test?
It was contended by the petitioner that while determining the satisfaction of the reasonable requirement of the public for the patented drug, the supplies made by the infringers i.e. Cipla have to be taken into account. The authorities have held that the supplies by infringers of the patented drug cannot be taken into account as the supply of the patented drug by the infringer is uncertain. The Court noticed from the record that the petitioner had filed an infringement suit against the infringer viz Cipla. It was the petitioner’s contention before the Court that the suit filed before the Delhi High Court against Cipla, the alleged infringer for injunction should be ignored as no injunction has yet been granted. The Court declined to accept this argument as an injunction could be granted at any time as the suit continues to be pending. Therefore, the infringer’s quantity of goods cannot be taken into account only because it could stop on any day. It is only where the patent holder accepts the infringer’s participation in the market and in fact grants him defacto licence could the infringer’s supplies be taken into account. The meaning to be given to the words “adequate extent”.
Section 84 (7) of the Act provides a deeming fiction which deems that reasonable requirement of the public is not satisfied if the demand for patented article is not met to an adequate extent. The aspect of adequate extent would vary from article to article. So far as luxury articles are concerned, the meeting of adequate extent test would be completely different from the meeting of adequate extent test so far as medicines are concerned. In respect of medicines, the adequate extent test has to be 100% i.e. to the fullest extent. Medicine has to be made available to every patient and this cannot be deprived/scarified at the altar of rights of patent holder.
d) Was the patented drug available to the general public at a reasonably affordable price?
It is mandated by Section 90 (1) (iii) of the Act that the Controller should ensure that the patented drug is available at reasonably affordable price. This reasonably affordable price has to be determined on the basis of the relative price being offered by the patent holder and the applicant. In the present case, the price at which the petitioner is selling the patented drug is at about Rs. 2,84,000 per month of therapy and the applicant was offering the same at Rs. 8,800 per month of therapy. Noticeably, the petitioner’s price of sale did not look reasonable.
The petitioner asserts that the price of the patented drug is to be arrived at taking into account not only the research and development costs for the patented drug but also the costs incurred in respect of research and development on failed drugs thereby making the price at which it is selling the patented drug a reasonably affordable price. Before the Controller, the petitioner had protested at the calling for the Balance Sheet. The figures enclosed therein would establish the total costs incurred by the petitioner on research and development of the patented drug which could have formed the basis to decide the reasonable price at which the petitioner could make the drug available to the public in India. Hence, no fault can be found with the impugned order holding that the patented drug is not available to the public at a reasonably affordable price.
e) Has the patented drug been working in the territory of India?
The petitioner submits that the patented drug had worked in the territory of India by importation of the same. Article 27 of the TRIPS agreement inter alia provides that there would be no discrimination in respect of patented product whether legally manufactured or imported. In Form 27, the patent holder while giving details of patented drug in India, has to make a declaration of the patented product having worked in India under two classifications namely manufacture in India and imported from other countries. The petitioner maintains that there is no requirement in the Act that for the purpose of patented drug being worked in the territory of India, it should necessarily be manufactured in India. The Union of India alleges to the contrary.
The Court looked through the prism of Section 83 of the Act which contains the legislative guidelines to govern the meaning of the words ‘worked in the territory of India’. The guidelines pronounce that the patent is not conferred upon the patent holder so as to enable him to enjoy a monopoly with respect to the importation of the patented article. On that account, it is safe to presuppose that some efforts to manufacture in India should also be made by the patent holder. Section 83 (f) of the Act provides that patent holder should not abuse his patent so as to inter alia adversely affect international trade. It would, therefore, follow that when a patent holder is faced with an application for Compulsory License, it is for the patent holder to show that the patented invention/drug has worked in the territory of India by manufacture or otherwise. Where a patent holder satisfies the authorities, the reason why the patented invention could not be manufactured in India then the patented invention can be considered as having been worked in the territory in India even by import.
f) Whether the application for compulsory license ought to have been adjourned by the Controller?
It was contended that in any view of the matter the Controller ought to have adjourned the consideration of the application for compulsory licence filed by Natco. This would have given petitioner time to work the patented drug on commercial scale in India. The Court found no merit in the aforesaid submission. Two conditions must be satisfied so as to adjourn the application for a compulsory license:
- The time which has lapsed since the patent was granted and when an application for compulsory license was made was insufficient to enable the patent holder to work the patented drug in India on a commercial scale; and
- Patent holder should have taken steps towards working the patented drug in India on a commercial scale with promptitude. The petitioner was granted the patent in India in 2008. The petitioner also has manufacturing facilities available in India. The petitioner has led no evidence before the authorities to indicate what steps they have taken and with what promptitude the same have been taken for the purposes of working the patent in India after 2008.
In these circumstances, the Court found no fault with the order of the Controller refusing to
adjourn the application for compulsory license.
Holding: The Court saw no reason to interfere with the orders dated 9 March, 2012 and 4 March, 2013 of the Controller and the Tribunal respectively granting compulsory license under Section 84 of the Patent Act to Natco. Accordingly, the petition was dismissed. Petitioner must be paid royalty raised from 6% to 7% of the net sale of Natco as remuneration for the compulsory license granted to Natco. This royalty was fixed keeping in view the fact that the petitioner had led no evidence to show the expenses incurred by it to invent the patented drug.
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