Parallel Imports and Exhaustion

1Section 107A(b) deals with international exhaustion of patent rights. The above provision is based on the principle of ’exhaustion of rights’ which states that when patented goods are sold by the patentee, the patentee shall have no further control over them. It follows that once there is international exhaustion of patent rights, importation of the same should be allowed. ‘Parallel importation’ refers to the importation of patented products from a country in which the products are legally on the market. Article 6 of the TRIPS Agreement specifically states that the dispute settlement mechanism under the TRIPS Agreement shall not be used to address the issue of exhaustion of intellectual property rights. This gives the WTO member countries the liberty to incorporate international exhaustion into their national law and the same cannot be objected to by other members by invoking the dispute settlement mechanism. The only way in which a provision on international exhaustion can be challenged invoking the TRIPS Agreement, would be on the ground that international exhaustion is selectively applied to pharmaceuticals by violating the mandate of art 27 of the TRIPS Agreement. The general language in which s 107A(b) is worded would make it impossible to challenge the provision on the ground that it selectively discriminates pharmaceuticals from other fields of technology. Thus the provision enables the 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. Such an act of importation will not amount to infringement.

2In Sotefin v Indraprastha Cancer Society and Research Center (2022), on an application for an interim injunction, the Delhi High Court held that “the term ‘patented product’ found in Section 107A(b) has to be understood with reference to ‘patented article’ read with definition of ‘patent’ and ‘invention’ as per Section 2 (1)(o), (m), and (j) respectively. On a cumulative reading of the aforesaid definitions, it means that patented products covered under Section 107A(b) would include only those products which are patented under the Indian Patents regime.” (para 62) It held that “The ‘patented product’ so imported to India, which would fall within the ambit of Section 107A(b) of the Act, can only be construed to mean such products which are manufactured with the authority of the patentee or by way of a compulsory license granted under law” (para 64), that “the reference to law, in the provision, undoubtedly, has to be to the Indian law”, and that “the foreign patent cited by Defendant No. 1 in the name of the third party, cannot be treated to be ‘duly authorized under law’.” (paras 64–65)

No international exhaustion like trademarks

3In Sotefin the Court held further that “the language of the afore-noted provision, when contrasted with Section 30(3) of the Trademarks Act, 1999, makes it clear that the doctrine of international exhaustion, as found in the Trademarks Act, is not intended to be incorporated under the Patents Act”, and that “Therefore, it would not be correct to argue that the aforesaid provision allows parallel imports as contended by Defendants No. 1 & 2.” (para 67) It held that “importing a product that infringes an existing patent is liable to be proceeded against under Section 48 of the Act, and therefore, it is immaterial whether the foreign patent holder has been impleaded or not.” (para 68)