Pharma Patents In India Must Be Compulsorily Licensed: Natco Finds A Safe Haven In Bayer Corporation V. Union Of India And Others

CASE TITLE:

Bayer Corporation vs Union of India

DATE OF ORDER:

15 July 2014

JUDGE(S):

Hon’ble M.S. Shah, C.J.

Hon’ble M.S. Sanklecha, J.

PARTIES:

Petitioner: Bayer Corporation

Respondents: Union Of India, The Controller of Patent, Natco Pharma Limited

SUBJECT:

The Bayer Corporation vs Union of India case involved compulsory licenses for the production of Bayer's cancer drug Nexavar. The Indian Patent Office allowed Natco Pharma to produce a generic version, citing affordability, accessibility, and public health concerns. The case sparked global debate on patent protection, innovation incentives, and access to essential medicines, particularly in developing countries. In December 2014, the Supreme Court dismissed a Special Leave Petition filed by Bayer Corporation, upholding India's first compulsory license in the case of Bayer Corporation v. Union of India & Ors. The decision of the Bombay High Court and the Intellectual Property Appellate Board to grant a mandatory license for Bayer's anti-cancer medication "Nexavar" was upheld by the Apex Court. For the first time, the subject of compulsory licensing was brought before the authorities for consideration after India signed up to the trade-related aspects of intellectual property rights (TRIPS), which was followed by the Doha Declaration in 2001 and the aforementioned Act's amendments in 2003 and 2005.

LAWS INVOLVED IN BAYER CORPORATION V. UNION OF LNDIA:

5. SECTION 83 OF PATENT ACT,1970:

General guidelines that apply to how patented inventions are operated: Despite the other provisions of this Act, when utilizing the authority granted by this Chapter, the following general factors shall be taken into account:

that the purpose of patents is to promote inventions and ensure that they are developed commercially in India as quickly as possible, to the maximum extent that is practically possible;

that their grant isn't made only to give patent holders a monopoly on importing the patented item;

that in a way that promotes social and economic welfare, a balance of rights and obligations, and the mutual benefit of producers and users of technological knowledge, the protection and enforcement of patent rights help to foster technological innovation, transfer, and dissemination;

5. SECTION 84 OF PATENT ACT,1970:

Anybody may submit an application under this section, even if they already hold a license under the patent. Additionally, no one is prohibited from claiming that the patented invention is not being used in India or that the reasonable requirements of the public with regard to it are not met.

5. SECTION 84(1) (3) OF PATENT ACT,1970

It says that anyone may apply for a compulsory licence after three years have passed since the patent was granted for one of three reasons: either the patented invention is not worked in India, the patented invention is not reasonably available to the public at a reasonable price, or the reasonable requirements of the public have not been met.

5. SECTION 90(1) [7] OF PATENT ACT,1970

The license is primarily intended for supply to the Indian market, but the licensee may export the patented product in compliance with subclause (iii) of clause (a) of sub-section (7) of section 84, if necessary.

5. SECTION 92A OF PATENT ACT,1970

A compulsory licence may be granted for the manufacture and export of patented pharmaceutical products to any nation that lacks the manufacturing capacity to produce the relevant product to address public health issues, provided that nation has also approved the import of patented pharmaceutical products from India through notification or another means.

OVERVIEW OF THE CASE:

5. German company Bayer Corporation is the owner of the patent for "Sorafenib," an active pharmaceutical ingredient used to treat kidney and liver cancer (Patent No. IN 215758), obtained in India. Sorefenib is marketed under the brand name Nexavar and is distributed globally.
5. In 2008, the generic version of the medication, Sorefenib, was first produced and distributed by the Indian company CIPLA. Bayer filed an infringement lawsuit against CIPLA in Indian courts (not covered in this case summary).
5. The generic version of CIPLA was being sold for 280,438 INR (roughly US $5280) per month, while Bayer was marketing their brand for 27,960 INR (roughly US $525) for the same quantity of tablets at the time the lawsuit was filed.
5. An alternative generic producer, Natco Pharma Limited, filed a compulsory licence request with the Controller of Patents challenging Bayer's Sorafenib patent. while CIPLA and Bayer are still at odds. Natco made its request for the compulsory licence based on Section 84 (1) of the Indian Patent Act of 1970, as amended in 2005.
5. Following the amendment, Section 84 (1) of the Indian Patent Act mandates compulsory licensing following the lapse of three years from the date of patent grant for any of the following reasons:

• The patented innovation has not lived up to the reasonable expectations of the public or
• The public is not able to obtain the patented invention for a fair and reasonable price, or
• The innovation that was patented.

5. The Controller concluded that because Bayer had violated S. 84 of the Patents Act of 1970, Natco Pharma should have been granted a mandatory licence. The Controller wrote the terms and conditions of the mandatory license and awarded Bayer a profit-sharing fee of six percent. Bayer appealed the Controller's decision to the Indian Intellectual Property Appellate Board (IPAB).

ISSUES RAISED:

• Are the requirements met for the granting of an obligatory license?
• Is the controller authorized to grant Natco Pharma a compulsory license to Bayer Corporation, with a royalty of six percent of the company's sales revenue?
• Does the delivery of the contested drug by Natco Pharma & CIPLA have to pass the reasonable requirement test?

ARGUMENTSB ADVANCED BT THE APPEALANT:

• Section 84(1)(b) of the Patents Act of 1970 could not have applied because Bayer Corporation claims that the drug Sorafenib Tosylate was already widely available and reasonably priced.
• Despite the enormous cost of the drug's invention, the company has invested a substantial amount of money in research and development.
• Furthermore, they asserted that the controller had failed to consider the cost of invention in calculating the royalties, in violation of Section 90(1) of the Patent Act of 1970.
• Because the word "export" was used in conjunction with the word "import," Bayer contended that it was not covered by the definition of "sell." The term "export" is specifically used in Sections 84 and 92A. Consequently, Natco Pharma's claim that a sale qualifies as an export transaction should not be upheld by the court.

ARGUMENTS ADVANCED BY THE RESPONDENT:

• Consequently, given the average person's purchasing power or the needs of the market, Bayer Corporation's price demands were unreasonable and in violation of the Patent Act.
• They asserted that Bayer Corporation's Patient Assistance Activity [PAP] is a restricted and optional charitable initiative. Because of this, the general public is unable to use it.
• Moreover, they asserted that the IPAB had complied with Section 90 of the Patents Act of 1970 by increasing the royalty from 6% to 7%.

JUDGEMENT ANALYSIS:

The court decided, citing a number of rulings, that:

The Hon. Supreme Court maintained the Bombay High Court's ruling mandating mandatory licensing for the life-saving drug "Nexavar," but it rejected the Bayer Corporation's SLP. The argument used by the High Court to support its decision was that, even with Cipla's supplies taken into consideration, the public requirement would not be met and that, either directly or through his licensees, the patent holder alone was responsible for meeting the reasonable needs of the general public.

A defence against Section 84 (1) (b) of the Patent Act was dismissed. This section requires that the patented medication be made available to the public at a price that is reasonably affordable, or to any segment of the public that tenders a price. This resulted from Bayer Corporation's charitable endeavours. Furthermore, it was determined that although Sections 84, 90, and 92A pertain to mandatory licencing, the term "exports" is employed in multiple contexts. According to the court, drugs should only be tested to 100%, or the maximum extent feasible.

The concept of compulsory licencing, as outlined in the Doha Declaration, allows the government to authorize a business to utilize patented goods and technology even in the absence of the owner's consent. In this case, Natco Pharma satisfied all prerequisites for mandatory licencing.

The ruling strikes a balance between the arguments pertaining to the patentee's rights and the public interest. It serves as an example of the focus of the Indian Pharmaceutical Patent Law, which actually advocates for more affordable access for the general public and the public interest as the court's primary concern.

As a result, the High Court denied Bayer Corporation's petition.

CONCLUSION:

The court found the instrument petition to be justified, dismissed it, and rendered a decision in the respondents' favor. The regulatory authorities are forced by Patent Linkage to carry out actions that span multiple domains, which permanently alters the nature of legal rights, transforming them from private to public rights. If patent linkage is to be implemented at all, it should at least verify that it is not included in the mandatory licensing method. Even though these policies are wise in terms of saving money on research and development, they still prevent generic competition from entering the market, which leads to a massive pharmaceutical monopoly because the drugs are difficult to obtain and, in the rare event that they are, are priced so high that the majority of people cannot afford them. Therefore, market approval should be given whenever there is a need and it benefits the public in order for the drug to be available to the general public. If there are genuine demands, the drug manufacturer may be required to pay a royalty to the patent holder. This could also deter foreign pharmaceutical companies from maintaining their monopoly in the Indian market, which would boost the country's economy even more.