Bayer Corporation v Union of India (2014)

Summary

“This petition under Article 226 of the Constitution of India challenges the order dated 4 March 2013 passed by the Intellectual Property Appellate Board (Tribunal). By the impugned order the Tribunal upheld the order dated 9 March 2012 passed by the Controller of Patents (Controller) granting Compulsory License to M/s. Natco Pharmaceuticals Limited (Natco) under Section 84 of the Patent Act 1970 (the Act).” (para 1) The licence was “in respect of the petitioner’s patented invented drug” “Sorafenib Tosylate” “sold under brand name Nexavar (patented drug).” (para 1) “On 6 December 2010 Natco” “approached the petitioner for grant of voluntary license”, “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.” (para 3) The Controller directed Natco “to pay to the petitioner royalty at 6% of its net sales” (para 3), and the Tribunal “upheld the order dated 9 March 2012 of the Controller granting the Compulsory licence to Natco while increasing the royalty payable by Natco to the petitioner from 6 to 7% of the sales” (para 3). The Bench was informed “that it is for the first time after India became a signatory to Trade Related Aspects of Intellectual Property Rights (TRIPS) followed by the Doha Declaration in 2001 and the amendments to the said Act in 2003 and 2005 that the issue of compulsory licence has arisen for consideration” (para 2).

The Bench held “that the second condition precedent for consideration of application for compulsory licence namely an effort to obtain a voluntary licence has been satisfied by Natco” (para 12), and that “In respect of medicines the adequate extent test has to be 100% i.e. to the fullest extent.” (para 13) It found “no reason to interfere with the impugned order to the extent it holds that the patented drug is not available to the public at reasonably affordable price” (para 14), and held that “Manufacture in all cases may not be necessary to establish working in India as held by the Tribunal. However, the patent holder would nevertheless have to satisfy the authorities under the Act as to why the patented invention was not being manufactured in India keeping in view Section 83 of the Act.” (para 15) It saw “no reason to interfere with the royalty being fixed at 7% of the net sale of Natco” (para 17). “Accordingly, the petition is dismissed. There shall be no order as to costs.” (para 21)

What the court decided

1. The scheme of section 84. “In terms of Section 84 of the Act an application for Compulsory Licence can be made by any person to the Controller on satisfaction of the following two per” “requirements/conditions:” “An application for compulsory licence can be made only after expiration of three years from the date of the grant of patent to the patent holder; and” “The applicant should have made an effort to obtain a voluntary licence of the patented invention from the patent holder on reasonable terms and conditions.” “It is only on the satisfaction of the above two requirements that the Controller can consider the application for compulsory licence.” (para 9)
2. Efforts to obtain a voluntary licence. “We also find that the petitioner’s response dated 27 December 2010 to Natco’s request for a Voluntary licence very clearly records its refusal to grant voluntary licence to the applicant. The so called window in the petitioner’s response for Natco to approach is illusory as it is open only if the Natco had anything to add to the application already made.” “We hold that the second condition precedent for consideration of application for compulsory licence namely an effort to obtain a voluntary licence has been satisfied by Natco.” (para 12)
3. The burden under section 87. “We find that in the scheme of the Act it for the applicant while filing an application for Compulsory Licence 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” ... “At that time it is for the patent holder in its opposition to aver and thereafter lead evidence to show that the reasonable requirement of the public with regard to the patented drug has been satisfied. The best evidence with regard to the extent the patent holder is making available the patented drug is within the knowledge of the patent holder i.e. petitioner.” (para 13)
4. Measuring the public’s requirement. “We find that this 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.” (para 13) On the figures of the petitioner’s “Country Medical Director”, “about 4004 RCC” (“Renal Cell Carcinoma”) “patients would require the patented drug while total number of HCC” (“Hepatocellular Carcinoma”) “patients who would require the patented drug would be another 4838 thus making it an aggregate of 8842 patients. As against the above requirement the petitioner has sold only 593 number of boxes i.e. supplied patented drug to about 200 patients in 2011.” “Thus the reasonable requirement of the public under Section 84(1)(a) of the Act is not satisfied even if one accepts the figures of the petitioner.” (para 13)
5. Supplies by infringers. “However, as submissions were advanced on this issue and it would have a bearing on other applications for compulsory licence, we are considering the same as a pure legal issue.” “Therefore 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.” (para 13) “Moreover, the obligation to meet the reasonable requirement of the public is of the patent holder alone either by itself or through its licensees.” (para 13)
6. “Adequate extent” for medicines. “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.” “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. In fact this is the mandate of Parliament by providing for Compulsory Licensing. This would also be in accord with Doha Declaration 2001 which inter alia reiterates flexibility to member countries so as to ensure access to medicines for all.” (para 13)
7. Determining the reasonably affordable price. “We are of the view that the Act itself does not bestow any powers of investigations with regard to the reasonably affordable price” ... “Thus, the same has to be arrived at on the basis of the evidence led by the parties before it of their respective prices.” “It is axiomatic that while deciding a lis it is not open to an adjudicator to become a participant in the lis.” “Therefore, 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. 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 a reasonably affordable price.” (para 14)
8. Research costs not proved. “The petitioner has not produced its audited accounts to establish the amounts spent on research and development.” “The petitioner has not chosen to produce the above best evidence before the authorities. An adverse inference, must necessarily be drawn against the petitioner. Further, in terms of Section 90(1) of the Act on which the petitioner is placing reliance only requires the expenditure incurred for research and development on the patented drug to be included for the purposes of considering the terms and conditions of the Compulsory License.” (para 14)
9. The patient assistance programme. “The PAP” (“Patients Assistance Programme”) “price is conditional price depending upon the patient satisfying certain preexisting criteria and completely at the discretion of the petitioner and the doctor attending the patient. The requirement under Section 84(1)(b) of the Act is that the patented drug should be available to the public at a reasonably affordable price i.e. to any member of the public tendering the price.” (para 14) “The concept of dual pricing such as PAP would be available while applying Section 84(1)(a) of the Act and not while applying Section 84 (1)(b) of the Act.” (para 14)
10. Worked in the territory of India. “Be that as it may, whether the invention is being worked in territory of India has to be looked at 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’.” “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 is worked in the territory of India by manufacture or otherwise. Manufacture in all cases may not be necessary to establish working in India as held by the Tribunal. However, the patent holder would nevertheless have to satisfy the authorities under the Act as to why the patented invention was not being manufactured in India keeping in view Section 83 of the Act.” “This satisfaction of the authorities is necessary particularly when the petitioner admittedly has manufacturing facilities in India. In the circumstances, the contention of Union of India that ‘worked in India’ must in all cases mean only manufactured in India is not acceptable.” (para 15)
11. TRIPS article 27. “So far as reliance upon Article 27 of TRIPS by the petitioner is concerned, we find that it ignores the exceptions thereto provided in Articles 30 and 31 of TRIPS.” (para 15)
12. Adjournment under section 86. “Section 86 of the Act which provides for adjourning application for compulsory licence has to essentially satisfy two conditions” ... “The time which has lapsed since the patent was granted and when an application for compulsory licence 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 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.” (para 16)
13. The royalty. “The Controller in the impugned order dated 9 March 2012 provided that royalty be paid at 6% of the net sales made by 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.” “The petitioner has not been able to show in what manner the royalty fixed at 7% is inadequate particularly as the petitioner has led no evidence of the cost incurred by it to develop the patented drug.” (para 17)
14. Public interest. “The observations of the Tribunal that the proceedings under Section 84 of the Act are in public interest is in view of the fact that the entire basis of grant of compulsory licence is based on the objective that patented article is made available to the society in adequate numbers and at a reasonable price. These are matters of public interest. The law of patent is a compromise between interest of the inventor and the public.” “Public interest is and should always be fundamental in deciding a lis between the parties while granting a compulsory licence for medicines/drugs.” (para 19)
15. Procedure. Disposition. “For all the above reasons, we see no reason to interfere with the orders dated 9 March 2012and 4 March 2013 of the Controller and the Tribunal respectively granting compulsory licence under Section 84 of the Act to Natco.” (para 20) “Accordingly, the petition is dismissed. There shall be no order as to costs.” (paras 20–21)

Subsequent treatment

• Appealed — The Supreme Court dismissed Bayer’s special leave petition against this judgment on 12 December 2014.