Author Details:-

Gurleen kaur,
St. Soldier Law College

Abstract:

In this case of Bayers corporation vs. Union of India, a conflict between Patent Protection and Public health interests was brought into light, which established a major precedent for compulsory licensing in India.

In a historic ruling, the Indian Patent Office gave NATCO pharma Ltd. the first-ever compulsory license in India to produce and market a generic version of Sorafenib Tosylate, the patented cancer medication manufactured by Bayer Corporation (marketed as Nexavar). In an attempt to overturn this ruling, Bayer claimed that the Patent office had made a mistake in granting the license. Declaring that the Patent Office had appropriately implemented the terms of the TRIPS Agreement and the Patents Act, 1970, the Delhi High Court maintained the verdict. Particularly for serious illnesses like cancer, the court struck a compromise between the rights of patent holders and the requirement to guarantee access to reasonably priced medication. In addition to highlighting the conflict between patent protection and public health interests, this case established a significant precedent for compulsory licensing in india.

Keywords:compulsory licensing, patent rights, access to medicine, public health, TRIPS Agreement, Patent Act 1970.

Facts of the case:

In this landmark judgement, the drug which is at issue is Sorafenib Tosylate which was sold under the trade name of Nexavar. 2008 saw the Indian government grant a patent for Nexavar. This medication, which was created specifically to treat kidney and liver cancer, turned out to be the best one. Which attracted the interest of the Indian generic manufacturer Cipla, which started producing and distributing Sorafenib in 2008. At the time of the lawsuit filing, Bayer company (a German company with patent number IN215758) accused cipla of infringing on patents. Cipla’s generic counterpart was sold for 280,488 INR (roughly US $5280) per month, while Bayer’s brand was marketed for 27,960 INR (about US $525) for the same number of tablets. NITCO applied for a compulsory license during the period when the medication was being sold by the Bayer Company for RS. 2,80,000/- per month, in between this dispute, NATCO sought a compulsory license in this application which was based on section 84(1) of the Indian Patent Act of 1970 as amended in 2005.

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:

1. Reasonable requirements of the public not being met: thai ground is invoked when the patented invention is not being manufactured or used in India to a significant extent, thereby not contributing to the development of the company
2. Patented invention not being worked in India: This ground is invoked when the patented invention is not being manufactured or used in India to a significant extent, thereby not contributing to the development of the country.
3. Patented invention being used to prevent or restrict competition: This ground is invoked when the patent holder uses the patent to prevent or restrict competition, thereby abusing their monopoly rights and harming the public interest.

Subsequently, the controller declared that NATCO pharma was entitled to an obligatory license because Bayer had failed to comply with Section 84 of the 1970 Patent Act.

The controller, who also awarded Bayer a 6% profit-sharing fee, drafted the terms and conditions of the mandatory license. Bayer applied to the Intellectual Property Appellate Board (IPAB) to challenge the controller’s decision.

Issues:

The issues that are raised in this judgment are as follows:

• The appeal raised procedural as well as substantive grounds and particularly raised several questions of pure law.
• whether the grounds under section 84(1) for the issuance of compulsory license are met?
• Does the controller have the authority to give Natco Pharma a license that is granted under duress and charges Bayer Corporation a royalty of 6% of its sales revenue?
• Is it necessary to satisfy the reasonable requirement test before considering Natco Pharma and CIPLA’s deliveries of the disputed drug?
• Does the Medicine Act consider a drug or formulation that breaks a patent to be a “spurious drug”?
• At the outset the IPAB clearly stated that the grant of compulsory licenses would be made on a case by case basis. The IPAB said that rather than providing a blank check on the compulsory licenses, the TRIPS Agreement limited their issuance by stating that they should only be granted on a “case to case basis of individualism.”The public benefit was given priority in the IPAB’s decision-making process over any potential benefits for the applicant or patentee.

Reasoning of the court:

The court’s reasoning in the Bayer corporation vs Union of India case (2009) can be summarized as follows:

• Bayer’s patent rights vs. public interest: According to the court, the public’s need for inexpensive medication takes precedence over Bayer’s patent rights.
• Unreasonableness of Bayer’s price: The court determined that Bayer’s monthly price of Rs. 280,000 was excessive and out of reach for the majority of indians.
• Failure to work the patent in india: According to the court, Bayer was unable to manufacture the medication in India, which prevented it from working the patent there.
• Abuse of patent rights: The court determined that Bayer had abused its patent rights by charging exorbitant prices and having the medication available in restricted quantities.
• Reasonable requirements of the public: According to the court, having access to reasonably priced medications is “reasonable”for the general public, especially in cases of life-threatening illnesses.
• Compulsory licensing as a remedy: The court determined that mandatory licensing was a suitable measure to guarantee that people had access to reasonably priced medication.
• Balancing public health and patent rights: The court found a middle ground between Bayer’s patent rights and the requirement for reasonably priced access to necessary medications.
• Natco Pharma Ltd.’s ability to manufacture: The court found that Natco Pharma Ltd. possessed the necessary skills to produce the medication in generic form.
• Reasonable
• royalty rate: Natco Pharma Ltd. was found to have a reasonable royalty rate of 6% by the court.

The court’s reasoning stressed the need to balance patent rights and encourage competition while giving the public interest top priority, especially in cases involving essential medicines.

High court’s decision

Order:

1. Natco pharma Ltd. was given an obligatory license to produce and market a generic form of sorafenib tosylate(Nexavar).
2. Natco Pharma Ltd. is permitted to charge no more than Rs. 8,800 per month for the generic version.
3. A six percent royalty on the net sales of the generic version will be paid to Bayer.

Key findings:

1. The outrageous price was an infringement on Bayer’s patent rights.
2. No work was being done on the patented invention in India.
3. The public’s reasonable requirements were not being fulfilled.

Rationale:

1. Balance between patent rights and public interest.
2. Need for affordable access to essential medicines.
3. Promotion of competition and public health interests.

Justice:

Justice Ravindra Bhat of the Delhi High Court delivered the judgement on March 9, 2009.

This landmark decision established a precedent for future cases involving access to essential medicines and permitted the production of reasonably priced versions of patented medications.

Supreme Court’s decision

Key points of the Supreme Court decision:

1. Affirmation of compulsory license: The supreme Court maintained Natco Pharma Ltd.’s acquisition of a compulsory license to produce and market a generic form of sorafenib tosylate (Nexavar).
2. Validation of Section 84: The Patents Act, 1970’s Section 84, which permits compulsory licensing to guarantee public access to necessary medications, ws upheld by the court.
3. Reiteration of public interest: The court found reaffirmed that the public interest supersedes patent rights, particularly with regard to access to reasonably priced medications.
4. Adopting royalty rate: The court found the 6% royalty on net sales of the generic version to be reasonable.
5. Reject of Bayer’s appeal: The Delhi High Court’s ruling was the subject of Bayer’s appeal, which was denied by the court.

Justice:

The bench consisted of Justice A.K. Patnaik and Justice Dipak Misra.

The Delhi High Court’s ruling was upheld by the Supreme Court, guaranteeing the continued availability of reasonably priced generic versions of necessary medications in India. The public health system, India patent law, and patient access to medications are all significantly impacted by this decision.

Analysis:

Legal significance:

1. First compulsory license in india: this ruling was the first time that section 84 of the patents act, 1970 was used to grant a compulsory license in india.
2. Interpretation of section 84: the court explained the grounds for mandatory licenses, such as “reasonable requirements of the public”and “patented invention not being worked in india”, by interpreting Section 84.

Key takeaways:

1. balance between public interest and patent rights: The court found a way to balance the need for inexpensive access to necessary medications with Byer’s patent rights.
2. reasonable requirements of the Public: The court interpreted “reasonable requirements of the public”to include the public’s right to reasonably priced medication, especially in cases of chronic illnesses.
3. using the patented invention in India: Because Bayer did not produce the medication there, the court determined that the company had not utilized the patented invention in India.

Impact:

1. Increased access to affordable medicines: The judgement ensured access to affordable generic versions of essential medicines, benefiting the public.
2. Precedent for future cases: the decision set a precedent for future cases involving compulsory licensing and access to medicines.
3. Global implications: the judgement may influence international debates on patent rights, public health, and access to medicines.

Criticisms and Concerns:

1. Potential impact on innovation: Some argue the decision may discourage innovation and investment in pharmaceutical research.
2. Patent holder’s rights: The judgement may be seen as infringing upon the patent holder’s exclusive rights.
3. Complexity of implementation: The decision’s implementation may be complex, particularly in determining reasonable royalty rates.

In summary, the ruling strikes a compromise between public health concerns and patent rights, guaranteeing the availability of reasonably priced medications and encouraging competition from generic manufacturers. It does, however, also give rise to worries regarding possible effects on patent holder’s rights and innovation.

Case laws:

1. Merck & Co. vs. Union of India (2005):
   This case established the legal precedent that a patentee may be in violation of the law if they refuse to grant a license.
2. Bristol-myers Squibb Co. vs. Union of India (2006):
   This case established that a patentee’s inability to use the patented invention in India may serve as justification for the issuance of a compulsory license.
3. Novartis AG vs Union of India (2007):
   The court’s reasoning on the interpretation of”reasonable requirements of the public”was taken into consideration, even though this case was later overturned
4. Merck & Co. Inc. vs. Union of India (2007):
   This case upheld the idea that a patent holder’s exclusive rights are subject to mandatory licensing and are not inalienable.
5. Roche Products (India) Pvt. Ltd. vs Union of india (2008):
   This case established the possibility of a “abuse of patent rights”resulting from a patentee’s high pricing.

In the Bayer Corporation v. Union of India case, these case laws were used to support the granting of a compulsory license, highlighting the necessity of striking a balance between patent rights and the interests of public health and access to reasonably priced medication.

Conclusion:

The court granted Natco Pharma Ltd. a mandatory license to produce and market a generic equivalent of Bayer’s patented medication, Sorafenib Tosylate (nexavar).

The key conclusions are:

1. balance between public and patent rights: the court found a way to balance the need for inexpensive access to necessary medications with Bayer’s patent rights.
2. Abuse of patent rights: the court determined that the drug’s restricted availability and high price tag from Bayer amounted to an abuse of patent rights.
3. Reasonable requirements of the public: According to the court, having access to reasonably priced medications is “reasonable “for the public, especially in cases of life- threatening illnesses.
4. Working of the patented invention in India: Since Bayer did not manufacture the medication there, the court determined that it had not worked on the patented invention in india.
5. Compulsory licensing as a remedy: the court decided that mandatory licensing was a suitable way to guarantee that people could obtain reasonably priced medications.

FAQs:

What was the court’s decision in this court?

• The court granted a compulsory license to Natco Pharma Ltd. to manufacture and sell a generic version of Nexavar.

What was the significance of this case?

• This case was significant because it marked the first time a compulsory license was granted in India under Section 84 of the Patents Act, 1970.

What is the Global significance of this case?

• The case has implications for international debates on patent rights, public health, and access to medicines, particularly in developing countries.

Can other companies also apply for a compulsory license for Nexavar?

• Yes, other companies can also apply for a compulsory license, but they will need to meet the requirements under section 84 of the patents act, 1970.

What is the duration of the compulsory license granted to Natco Pharma Ltd.?

• The compulsory license was granted for the remaining term of the patent which is until 2020.

Sources:

• https://ww.sonisvision.in/blogs/bayer-corporation-v.-nion-of-india-1622009-dlt-371
• https://www.indialaw.in/blog/intellectual-property-rights/bayer-corp-v-union-of-india/
• https://lawbhoomi.com/bayer-corporation-vs-union-of-india-2014-bombay-hc/
• https://unctad.org/ippcaselaws/sites/default/files/ippcaselaws/2020-12/Bayer%20Corporation%20Vs.%20%Union%20of%20%India%20%and%20Others%20IPAB%202013.pdf
• https://indiankanoon.org/doc/59608523
• https://www.legalserviceindia.com/legal/article-5324-case-analysis-of-bayer-corporation-v-union-of-india.html

full citation: [162(2009) DLT 371]