BAYER CORP VS NATCO PHARMA - THE FIRST AND TILL DATE ONLY COMPULSORY LICENSING OF PATENT IN INDIA BY - ANISHA MAAN
BAYER CORP
VS NATCO PHARMA
THE FIRST
AND TILL DATE ONLY COMPULSORY LICENSING OF PATENT IN INDIA
AUTHORED
BY - ANISHA MAAN
Abstract:
The current paper talks about the compulsory licensing regime
in India. The international provisions which provide for the development of the
patent licensing regimes for countries to inculcate into domestic laws and
abide by them. The paper sheds light on the very first and till date the only
compulsory licensing case Bayer Corp vs Natco Pharma. The contentions put forth
by the parties and the reasons for the outcome of the case. The start to the
end of the case which has been the hall ways of the controller general then
proceeded to the IPAB advancing to the Bombay high court finally resting in the
supreme court of India where it founds its destination and final answer. The
paper explorers the importance of the voluntary licensing, TRIPS agreement, the
Doha Conference. The patents act 1970 which talks about the compulsory
licensing under section 84. The conditions for the grant of compulsory
licensing primarily depend upon the general availability of the patented
invention to the public at large, the affordability and the workability of the
patent till date in the country. A compulsory license can be sought only on the
expiration of certain conditions: from the lapse of 3 years when the patent was
registered, when the voluntary licensing has been exhausted. The law does not
manmade for a voluntary license to be sought multiple times, once it fails
compulsory licensing is the only option. The concept of royalty is to be
followed religiously which is set by the authorities. The compulsory license
can be revoked after the expiry of 2 year from the date it was granted.
Introduction
The demand for medicines is ever growing with every new day a
new health issue is discovered, along with which many new developments take
place in the labs which lead to generation of new medicines some effective some
partially, some affordable some only to be used as reference due to the price
factor. With so much economic variations in the society worldwide not all can
get access to the fancy “pricy” medicines. Here is where the debate arises that
are the Pharma companies only innovative where it needs to be, where it pockets
money even after the recovery of the cost of the R&D, production etc. the
approach depends on the use of the medicine, by what kind of people and the
reach of it.
There has been a difference of opinion between two section of
thinkers who believe that medicines eventually are made for the larger masses
to consume and not only the ones who can afford them comfortably, while on the
other hand this section of people only think to protect the innovation and make
profits from it. Both the arguments have their pros and cons which can be
weighed against each other and still be on the same level.
It does take financial assistance to dwell deeper to create,
research and build something new and to recover and make profit is the cardinal
rule of an entity whereas it is made to cater to the society and the people who
are in need of it.
The same conflict of interest arose between the bayer corp
and Natco ltd, the incident does have a backdrop to it but that has no
influence over Marcos actions which were taken, it began with Cipla a company
in India who began producing the generic version of sorafenib drug.
Background
Bayer corp is a global company engaged mainly in the
agricultural and healthcare life science with a history of 160 yrs. specific to
India the companies presence can be traced back to 126yrs from the year 1896.
From having its roots in Europe evolving from a dyestuff textile factory to a
chemical factory and eventually venturing into other sectors bayer has come a
long way creating a dominant position in Pharma and agricultural sectors.
Natco Pharma Limited established in the year 1981 in
Hyderabad. Natco is well recognised for its innovation in pharmaceuticals
R&D. Providing generic medicines to the masses.
About
sorafenib:
Sorafenib is a drug used to treat advanced renal cell
carcinoma {late stage kidney cancer}, hepatocellular carcinoma {liver cancer}
in cases where surgery has been ruled. It is also used to treate differentiated
thyroid cancer which is recurring, or has spread throughout the whole body to
other parts.
Sorafenib medels with the growth of cancer cells, which are
technically destroyed by the body.
Sorafenib is marketed worldwide under the brand name Nexavar.
Sorafenib was developed by bayer pharmaceuticals in 2001, the
patent issuing authority being USPTO [ united states patent and trademark
office]
What is
compulsory licensing:
Compulsory licensing is a process by which the government
themselves use or allows anyone else to use patented products of someone else
without the consent of the patent owner. Compulsory licensing is a kind of
flexibility found place in WTO’S agreement on intellectual property, the TRIPS
(trade related aspects of intellectual property rights) agreement.
TRIPS -
ARTICLE 31:
Compulsory licensing either being acquired by an individual
or company has to within a reasonable period of time tried to negotiate a
voluntary license with the patent owner, if the said process fils can a
compulsory license be granted.
There must be proper financial/ economic remuneration to be
paid to the to the patent holder after the issuing of the compulsory licensing.
The TRIPS agreement does not define “financial” or “economic” anywhere, the
decision lies with the authorities of the concerned country.
The only Time when the step of voluntary licensing can be
skipped is during “emergencies” but the remuneration cannot be skipped and is
mandatory to pay. they can be a. national emergencies, b. Other circumstances
or extreme urgency, c.public non - commercial use”, or d. Anti- competitive
practices.
Doha
ministerial conference 2001:
Doha ministerial conference 2001 has brought a change in the
TRIPS agreement adding an additional type of compulsory licensing. It states
that cheaper copies produced elsewhere should be made available to countries
unable to manufacture pharmaceuticals.
The aim of the said change incorporated is if a country is to
obtain a compulsory license for the production of its own affordable
pharmaceuticals, overseas producers can step in and supply the needful even if
a compulsory license is needed in that country.
SECTION 84 - COMPULSORY LICENSING IN INDIA, THE
PATENT ACT OF 1970:
Section 84 of the Patent Act of 1970 talks about compulsory
licensing in India. Compulsory licensing is derived in India from article 31 of
TRIPS. Compulsory licensing is dealt with in chapter XVI of the act.
Section 84 puts out who can apply for compulsory licensing,
an application for grant of compulsory licensing can be made nay time after the
expiration of the mandatory time of 3 years from the date of the grant of the
patent.
Section 84(1):
As per section 84(1) any interested person to gain a
compulsory license may after the expiration of 3 years from the date of the
grant of a patent may apply for the same through an application made to the
controller for the grant of compulsory licensing on any of the following
grounds.
•
Requirements of the
public have not been satisfied with respect to the patented invention.
•
Patented inventions have
not been made accessible to the public at a affordable price
•
The patented invention
has not been worked in the territory of India.
Conditions
for the grant of compulsory licensing can be inferred from section 84(1) of the
patent act of 1970:
1.
When the innovation has
not been made available in the public domain in sufficient quality compulsory
license can be applied for.
2.
Non- affordability: when the invention has been fairly high
priced which cannot be utilised by the people, this becomes a ground for the
grant off the compulsory licensing.
3.
Working of the patent:
when the patent has not be worked on in India commercially on a big scale
within a reasonable time frame, a compulsory license cab be granted for the
benefit if the people to a third party making such arrangements for the
workability.
Facts of the case:
Backdrop:
Cipla was the very first Pharma to produce and market the
generic version of sorafenib. It was introduced in the year 2008 under the name
“soranib” with the description of “sorafenib tablets 200mg”.
A suit of infringement was filed against cipla by bayer
before the indian courts.during the tussle between cipla and bayer, Natco
Pharma another generic manufacturer in the mean time filed for compulsory
licensing against buyers patent on sorafenib before the controller of patents.
{check to change}. The compulsory licensing was demanded under section 84 (1)
of the indian patent act of 1970, as amended in 2005.
Tussle between bayer corp and natch: the first compulsory
licensing case in india till date;
Bayer obtained marketing approval for Sorafenib in 2005 and
launched its product worldwide in 2006 under the brand name nexavar. The drug
was launched in india in 2008.
Bayers total sales of Sorafenib in 2009 were US$934 million
Bayer charged approxametly US$ 66,813 per patent per year
whereas in india US$ 5,500 per month for this drug.
Natco pharma filed for a compulsory licence for the patented
drug of the bayer corp before the controller of patents on 29 July, 2011. The
compulsory licensing was requested under conditions of section 84(1) of the
patents acts of india 1970. The controller on 9 march, 2012 granted the
compulsory license and awarded royalty at 6% from the net sales to bayer corp
and the terms and conditions were drafted by the controller. The price for the
drug to be sold at was fixed at Rs. 8800/- (eight thousand eight hundred).
The compulsory license granted to Natco Pharma was
conditioned:
A.
Non - exclusive,
B.
Non - exclusive
C.
For the balance term of
the patent (the term of a Patent in India is 20 years, compulsory license an be
applied for after the expiration of 3
years from the date of grant of the patent)
The controller had granted natco the compulsory licensing on
the grounds of bayer corps failure to meet the requirements under section 84 of
the patents act 1970. Which were in this case:
1.
Was not available to the
general public at a reasonable price,
2.
Was not satisfying the
need for the drug within India and
3.
Had not been worked well
within India.
The biggest contention of natco Pharma was that they were
proposing to sell the soraphenib drug under RS 10,000/- (ten thousand) to a
patient each month whereas bayer corp was selling the drug priced at RS
2,80,428/- (two lakhs eighty thousand four hundred twenty eight) the non reasonable
pricing was the main factory contributing to the grant of the compulsory
licensing.
Voluntary licensing:
Voluntary licensing is an important aspect which shall be
complied with before requesting for a compulsory licensing. Voluntary licensing
is when the third part desirous of using the patent seeks permission from the
patent owner to do so. This is done through writing an application to the
patent owner and requesting him for the same, setting out the terms and
conditions and royalty negotiations. Once the voluntary licensing way has been
failed that’s when compulsory licensing comes into the picture.
Natco pharmas request for a voluntary license was rejected on
December 27, 2010, natco was seeking license to manufacture and sell the
patented drug.
Bayer corp appealed to the Indian Intellectual Property
Appellate Board (IPAB) against the decision of the controller:
There were several questions raised infront of the tribunal
involving procedural as well as substantial grounds and particularly of pure
law.
On 4 march, 2013, the Tribunal after duly hearing both the
parties upheld the order of the controller granting compulsory licensing to
Natco Pharma. However there was a modification made to the order the royalty
awarded was increased from 6% to 7% of the net sales of the patented drug.
The law regarding compulsory licensing was further clarified
by the IPAB. It was made clear that the grant of a compulsory license shall
depend on a case to case basis, further mentioning the TRIPS agreement which
does not give a carte blanche when it comes to matters concerning compulsory
licensing. It stated that there shall be an analysis of grant of such
compulsory license on individualises and case to case Basis. The decision of
the IPAB was founded on the basis of the benefits that the public shall be
getting.
The following pointers were
highlighted by the IPAB which were not to be neglected while deciding the
appeal:
•
The grant of patents
shall not impede protection of public health:
•
The rights and obligation
of the patentee must be balanced with the grant of the patent:
•
The benefits of the
patented invention shall be made available to the public at a reasonably
affordable price by the patentee.
Out of many contention put forth by the appellate bayer corp
the most important was that involving a voluntary licensing. According to the
bayer corp Natco Pharma did not put forth a proper voluntary licensing request
and which was not in compliance with section 84 (6) (iv).
The respondents letter seeking voluntary licensing to the
appellant (bayer) outlined the inability of the appellant to meet with the
requirements laid down in section 84 of the patent act, 1970, and that the
respondent wanted to sell the drug for a much lower price at what it was being
sold at that point. The letter was viewed as a veiled threat by the appellant
owing to the contents which included that the letter for voluntary license was
made without prejudice to the respondents right to challenge the patent.
It was noted that if there was a veiled threat were was also
a veiled answer. There was an offer made for a voluntary license which was
rejected by the appellant, hence there is no provision which stated that there
shall be subsequent offers for voluntary licensing. The first failed attempt
for voluntary licensing is enough to
applying for a compulsory licensing.
The tribunal was not in conformity with the controllers findings regarding section 84
(1) (C), the tribunal did not agree that the working in India in terms of
section 84 (1)(c) of the act could only
be satisfied if the patented drug was manufactured in India.
The petitioner went on to file a writ of certiorari in the
Bombay hight court to quash the impugned order passed by the IPAB which was
merged along the controllers order. On 15 July, 2014, the Bombay High court
confirmed the findings of the tribunal.
The Bombay high court was in compliance with the terms and
conditions on which the compulsory license was granted to natco Pharma as they
meet section 90 of the act, the enhancement of the royalty from 6% to 7% of the
net sales of the drug sold by natco was taken into note.
A special leave petition was filed by the bayer corp against
the decision of the Bombay high court with the supreme court. The SLP was
dismissed and upheld the compulsory license. The bayer corp was asked about the
cost of developing the drug and why hadn’t it submit the details of the R&D
expenses involved in developing the drug to the controller. It was discovered
that the company had recovered all the money spent on developing the drug in
the first year itself which was based on the records produced before the drug
controller.
According to natco Pharma, in
india at least 100,00 people suffer from different types of renal cell
carcinoma and hepatic cell carcinoma. Further every year 30,000 new patients
are diagnosed with both these diseases and nearly 24,000 patients die.
Knowledge
at Wharton article had made some observations:
According to the Wharton article natco was awarded the
compulsory license on three grounds:
I.
The price at which the
drug was sold by bayer was not “reasonable enough” which was accessible by only
2% of India’s patient population, and was not manufactured in the country.
II.
Natco’s version of the
drug Sorafenib is priced at 97% less
than the German brand bayer corp
III.
The Natco ruling could
result in more demands being raised for compulsory licenses, at present in
India about 90% of the patent- protected
drugs of pharmaceuticals multinationals are imported and priced very high.
Factors
taken into account for the grant of a compulsory license:
(i)
The measures taken by a
patentee to use the invention to its fullest since the time it has been
selling, the nature of the patent
(ii)
The applicants capacity
and ability to work the invention to the public advantage:
(iii)
Were the applicant
granted the compulsory license there shall be capability of the applicant to
undertake the risk in providing capital and working the invention:
(iv)
There has been a
voluntary licensing initiation which has failed within a reasonable time. In
the case of national emergency or other circumstances of extreme urgency or in
case of public non-commercial use or on establishment of a ground of
anti-competitive practices adopted by the patentee, this factor need not be
considered.
Recent
dispute over regorafenib:
Delhi high court has refused to grant interim injunction in favour
of bayer healthcare in patent dispute over regorafenib. Bayer healthcare LLC
was refused an interim injunction in a patent litigation against Natco Pharma
and MSN Laboratories in which the former has sought interim injunction against
the two Indian companies from infringing the patent rights of its anti-cancer
drug regorafenib, branded in India as Nublexa and Resihance.
The court as due consideration over the facts and arguments
put forth, held the public interest as paramount and noted the price difference
between the patented product and the products from the indian generic firms,
along with a genus patent technically covering the compound has already expired
patent protection in the country, while rejecting the application for interim
injunction.
Justice navin Chawla observed in an ordered dated July 5
,2023 that such injunction may be refused in public interest as there was a
starc disparity between the price of the product offered by the plaintiff
(bayer) and the defendant (Natco and MSN Labs) for a diseases which is life
threatening.
In the present case, bayer is selling their product at the
range of Rs. 36,995/- (thirty six thousand nine hundred ninety five) by
importing the same into India, on the other hand the defendants selling price is
Rs. 9000/- (nine thousand) which is manufactured within India.
The defendants were given directs to maintain complete
accounts of manufacture and sale of the products with the subject patent and
file statement of accounts, on affidavits on a half yearly basis before the
court this is to be done to maintain balance of convenience.
REFERENCES
•
https://www.mayoclinic.org/drugs-supplements/sorafenib-oral-route/side-effects/drg-20068145?p=1#:~:text=Sorafenib%20is%20used%20to%20treat,an%20antineoplastic%20(cancer)%20agent.
- mayo clinic
•
1 Law relating to
intellectual property rights - V.K. AHUJA