India's first compulsory licence over Bayer's patent

Author: Betsy Vinolia Rajasingh (Tamil Nadu Dr Ambedkar Law University, India)

Natco Pharma Ltd v Bayer Corporation—Compulsory Licence Application No 1 of 2011 (Controller of Patents, Mumbai), 9 March 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps075, first published online: May 10, 2012

The Controller of Patents (Intellectual Property Office, Mumbai) has granted the first Indian compulsory licence over Bayer's patent for the cancer drug Sorafenib on grounds of non-fulfilment of reasonable requirements of public with respect to the patented invention, non-availability of the drug at a reasonably affordable price, and non-working of the invention in India.

Legal context

Natco is the first Indian case that has invoked section 84(1) of the Indian Patents Act 1970. Section 84(1) encompasses the law relating to compulsory licensing. Provisions on compulsory licensing, including section 84(1), were enacted by the Patent (Amendment) Act 2002, which replaced earlier compulsory licensing provisions, in order to facilitate Indian patent law's compliance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) under the World Trade Organization to which India is a signatory.

Section 84(1)(a), (b), and (c), on which the issues contested in Natco are based, authorizes any interested person to make an application to the Controller of Patents following the expiry of 3 years from the date of grant of patent alleging that the patentee has not

• satisfied the reasonable requirement of the public with respect to the patented invention; 
•  made available the patented drug at a reasonably affordable price; or 
• worked the patented invention in India.

In deciding this case, the Controller did not rely solely on the relevant sections of the Act but also referred to the Paris Convention 1883 and TRIPS to establish legislative intent and provide conceptual clarity regarding the Act's compulsory licensing provisions.

Facts

Bayer, a subsidiary of the German pharmaceutical giant Bayer AG, is globally well reputed for the invention and manufacture of innovative drugs. In the 1990s, Bayer invented a drug, Sorafenib (Carboxy Diphenyl Substituted Ureas), which is used for treatment of advanced renal cell carcinoma (kidney cancer) and hepatocellular carcinoma (liver cancer). Sorafenib is not a life-saving drug but a life-prolonging drug, which extends life by 4 to 5 years for kidney cancer patients and 6 to 8 months for liver cancer patients. Bayer initially made a patent application for the drug before the US Patent and Trademark Office in 1999. Subsequently, by way of an international application under the Patent Cooperation Treaty, Bayer's application entered the national phase of registration in India during 2001 and was accorded protection in 2008 as Indian Patent No 215758.

In 2005, Bayer had developed and started marketing the drug internationally under the market name Nexavar. On receipt of regulatory approval for importation, the drug was later launched in India in 2008. The cost of the drug in India for a month's treatment amounted to INR 2,800,428. Citing the high price and the fact that the drug was not fully marketed across India, the Indian generic drug manufacturer Natco Pharma Limited sought a voluntary licence from Bayer in 2010. Natco proposed to manufacture and then market the drug for INR 8,800—a fraction of Bayer's cost for a month's therapy. The request for the voluntary licence was refused. Consequently, once 3 years had elapsed from the date of grant of the patent, Natco applied for a compulsory licence under section 84(1).

Analysis

The principal issues considered by the Controller were based on Bayer's non-fulfilment of the stipulations set out in section 84(1)(a), (b), and (c).

Reasonable requirements of the public

Examining the applicability of section 84(1)(a), the Controller dwelt on the subject of potential patients in India afflicted with kidney and liver cancer and the availability of the drug for their treatment. Placing reliance on the GLOBOCAN 2008 report (a publication by GLOBOCAN Project of the World Health Organization) for data as to the incidence of such cancer in India, which was cited by both Natco and Bayer in their submissions, the Controller concluded that the number of likely patients in India for a year would be significantly higher than Bayer's estimated 8,842 patients. Nevertheless, even if Bayer's figure for patients per year were accepted, the quantity of drugs which Bayer imported in the year 2011 would have only catered to the therapeutic needs of 2 per cent of the assumed 8,842 patients.

The Controller, rejecting Bayer's contention that it met the requirements of the public in tandem with an alleged infringer, Cipla Limited, against which Bayer had previously initiated infringement proceedings in the High Court of Delhi, stated that the onus of complying with the condition prescribed in section 84(1)(a) lies exclusively with Bayer and his lawful licensors, if any.

Accepting Natco's arguments that India's healthcare infrastructure is still in an emergent stage with a large populace belonging to the lower and middle income levels, the Controller affirmed that Bayer's importation of the drug had been in negligible quantities in the years following the patent grant. In addition, the failure to manufacture the drug within India in conjunction with its availability only at certain premier hospitals in metropolitan cities for an excessively high price, indicated Bayer's default in fulfilling the ‘reasonable requirement of the public’ under section 84(1)(a). In this connection, the Controller referred to section 84(7)(a)(ii) and confirmed its applicability to the issue as demand for the drug had not been met to an adequate extent or on reasonable terms.

Reasonably affordable price

Bayer asserted that a ‘reasonably affordable price to the public’ under section 84(1)(b) of the Act implied reasonableness with reference to the general public and the patentee: Bayer, as patentee, had invested substantial capital in research, development, and manufacture of the drug. Rejecting Bayer's claim, the Controller endorsed Natco's view that reasonableness contemplated under the Act refers solely to the public and not to the patentee as well.

Refusing to accept Bayer's assertion that Cipla had made the drug available at a reasonably affordable price of INR 30,000 for a month's treatment, the Controller reiterated the inapplicability of an alleged infringer's costs as a means of determining the affordability of Bayer's drug. Therefore, on the basis of the drug being high-priced, it was declared not reasonably affordable to the Indian public at large.

Worked in the territory of India

The term ‘worked in the territory of India’ is not defined under the Act. Natco had pleaded that the working requirement signified the requirement to manufacture the invention in India. Bayer disagreed: importation of the patented invention would suffice as the Act failed to mention any requisite for manufacturing within India, as was evident from the deletion of the words ‘manufacture in India’ from section 84(7)(a)(ii).

The Controller concluded that the item was deleted and subsequently inserted as a separate ground for grant of a compulsory licence under section 84(1)(c). The intent behind such alteration, he explained, is not as basic as Bayer's proposition, but can be gathered from reading Article 5(A)(1) of the Paris Convention conjointly with Article 27(1) of TRIPS. These provisions suggest that the mere importation of a patented invention does not entail forfeiture of the patent but something of lesser import such as the issuance of a compulsory licence. Moreover, Article 5(A)(2) of the Paris Convention states that the abuse of patent rights, for instance by failure to work the invention, might be prevented by enacting laws on compulsory licensing. Article 5(A)(2), via Article 2(1) of TRIPS which underpins the requirement that member countries comply with provisions of the Paris Convention, is therefore the foundation for compulsory licensing provisions under the Act.

The Controller also relied on section 83 of the Act to decipher the overriding legislative policy behind the provisions relating to compulsory licensing found in section 84. Section 83, in view of preventing abuse of patent rights, mandates restraint on gaining a monopoly by importation, since it can be an impediment to trade and international technology transfer. Applying this rationale in section 83, the Controller established that working in India, as mentioned in section 84(1)(c), essentially means manufacturing in India and not mere importation into India. Further, referring sections 84(6) and 90(2), which disallows a licensor from importing the patented invention but requires manufacturing the same within India in order to work the invention, he emphasized that the same logic must apply to a patentee as well.

Considering that Bayer had manufacturing units in India for drugs, including cancer drugs, yet refrained from neither worked nor even intended to work the invention in India for 4 years following the patent grant, the Controller held that Bayer had failed to comply with section 84(1)(c).

Practical significance

The ruling is a landmark precedent on access to medicines in India as the abuse of patent rights has been checked through the issuance of a compulsory licence for the first time. Given that the most recent cancer drugs are a superior option to traditional chemotherapy treatments, but are so expensive their high cost has put them out of reach of the common man.

A few days after this judgment, Swiss healthcare major Roche Holding AG released the news of its collaboration with an Indian pharmaceutical company to repackage and sell its cancer drugs at a low and affordable cost. Whether this move is a direct consequence is unclear, yet the initiative to make high-cost patented drugs accessible to a larger segment of the public is a welcome sign.