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21 March 2017

Bolar exemption permits exports of patented invention

Summary:

By Judgment & order dated March 08, 2017, a Single Judge of the Delhi High Court interpreted the exemption to infringement under Section 107A of the Patents Act, 1970 (Act) to hold that said exemption permits exports from India of a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product. The Single Judge held that the word “selling” under Section 107A of the Act includes within its ambit the meaning of the term “export” and thus held that the absence of the word “export” under Section 107A of the Act does not lead to any inference that said provision does not include “export” within its scope.

 

Facts in brief :

The above interpretation of Section 107A(a) of the Act was issued by the Single Judge through a common order in the cases of Bayer Corporation v. Union of India (WP(C) 1971 of 2014) and Bayer Intellectual Property GMBH & Anr. v. Alembic Pharmaceuticals Ltd. (CS(Comm)1592 of 2016). The former case is a writ petition filed by Bayer seeking a mandamus to the Customs Authorities to seize the consignments for export containing products covered by the Patent No. 215758 directed to the anti-cancer drug Sorafenib tosylate (Bayer’s Trade name-Nexavar), manufactured by Natco by virtue of the compulsory license to said patent issued by the Controller General of Patents in 2012. Natco in said writ petition asserted that its exports of the active pharmaceutical ingredient (API) of Nexavar to China falls within the scope of Section 107A of the Act as its exports are for the purpose of conducting development/clinical studies and trials. The latter case is a commercial suit instituted by Bayer seeking a permanent injunction against Alembic from infringing its Patent No. 211300 directed to the blood thinning drug Rivaroxaban. Alembic in said suit asserted that it had not commercially launched the drug Rivaroxaban and had only exported the drug for the purposes under Section 107A of the Act. Alembic also undertook that it will provide Bayer a months’ notice before commercially launching the drug to enable Bayer to avail of its remedies. Accordingly, the common question of law before the Single Judge adjudicating both matters was whether Section 107A(a) of the Act includes the act of “export” of the patented invention, strictly for the purposes mentioned therein.

 

Order of the Single Judge of the Delhi High Court :

In arriving at the instant ruling that “export” of the patented invention is included within the scope of Section 107A of the Act, the Single Judge reasoned as follows:

Firstly, the Single Judge analysed the wordings of Section 48 and Section 107A of the Act and observed that the reason for specifically including the word “selling” under said provision in addition to the words “making” and “constructing” was to account for the fact that in the field of pharmaceuticals, the manufacturers and marketers of pharmaceutical products are not always themselves the developers of such pharmaceutical product. Accordingly, the Single Judge held that sale, even if for profit, by a non-patentee of a pharmaceutical product, solely for the purposes prescribed in Section 107A of the Act would not constitute infringement and thus cannot be prevented. In this background, the Single Judge discerned that the issue between the parties was whether the word “selling” in Section 107A is confined to within the territory of India as asserted by Bayer or whether the word “selling” is without any such restriction of being within India only and would include selling outside India also, provided it is only for the purposes prescribed in Section 107A of the Act, as asserted by Natco and Alembic.

After an extensive analysis of the definitions of the terms “selling”, “sale” and “export”; the Single Judge held that the words ‘sale’/ ‘selling’ as per their literal meaning are without any geographical limitations and therefore held that the word “selling” under Section 107A of the Act would also include the transfer of the patented invention to a country other than India, despite the fact that said transfer would also qualify as exporting. The Single Judge held that the word “selling” under Section 107A is of the “patented invention” i.e. a product and not of the “information” required to be submitted to any authority under any law of India or foreign country and accordingly rejected the contention by Bayer that the transfer contemplated under Section 107A of the Act is that of “information” and not the “patented invention”. The Single Judge also treaded on caution and observed that it is not always that the term “sale” includes within its scope the meaning of the term “export”. However, in the instant case, the Single Judge held that there is no other provision under the Patents Act, 1970 that uses the word term “selling” to only restrictively mean sale with India. Another interesting observation by the Single Judge was that the term “export” is also not mentioned under Section 48 of the Act and the Single Judge thus reasoned that the absence of the word does not connote the meaning that a patentee does not have the right to export the patented product and thus held that for the purposes of Section 107A of the Act, the term “selling” includes within its scope the term “export”. The Single Judge also pertinently held that the right of manufacturers/producers of medicines to make, construct and sell including by way of export a patented invention for the purposes under Section 107A of the Act is a fundamental right under Article 19(1)(g) of the Constitution of India and therefore held that such sale can only be curtailed by express law and held that mere absence of the word “export” under Section 107A of the Act cannot be said to curtail the ambit of “selling” such as to exclude export.

Secondly, the Single Judge considered whether the above interpretation of Section 107A of the Act is in conflict with Article 31(f) of TRIPS, which states that laws of member countries may allow the use of patented products/processes such that the use is predominantly for the supply of the domestic market of the member country authorizing such use. The Single Judge held that the above interpretation of Section 107A of the Act is not in conflict with Article 31(f) of TRIPS as Section 107A of the Act is not an exception to the right conferred under Section 48 of the Act but only permits sale of the patented product during the term of the patent to obtain regulatory approvals in order to manufacture and market the products after the expiry of the patent term. The Single Judge also observed that even assuming that Article 31(f) of TRIPS allows for the Bolar exemption to be applicable only in the domestic context, the Indian legislature was well within the ambit of Article 31(f) of TRIPS to enact a law that permits export under the Bolar exemption keeping in mind the nature and importance of its generic industry.

Thirdly, the Single Judge dismissed the contention raised by Bayer that if sale by way of export is included within the scope of Section 107A of the Act, this Court lacks jurisdiction to enforce said provision in foreign territories to ensure that the exported products are used only for the purposes prescribed under Section 107A of the Act. The Single Judge relying upon the Nine Judge Bench decision of the Hon’ble Supreme Court in Mafatlal Industries v. Union of India (1997) 5 SCC 536 held that merely because there exists no provision of law relating to export of pharmaceutical products for ensuring that the API exported is used in the destination country for the purposes for which it has been exported; does not lead to the interpretation that Section 107A of the Act ought to be interpreted to not include export within its scope. The Single Judge also held that even if such an eventuality were to occur the patentee is required to enforce its rights in that country. The Single Judge thus held that if the sale by way of export is declared to be for the purposes of Section 107A of the Act, no fetters can be imposed on said 107A of the Act and the same will also permit export.

Finally, the Single Judge also considered a specific contention raised by Bayer in the instant writ petition. Bayer contended that even assuming that Section 107A of the Act includes “export” of the patented invention within its scope; said provision cannot be relied upon by Natco as Natco was granted a compulsory license under Section 84 of the Act which was subject to a condition under Section 90(1)(vii) of the Act such that the license is granted solely for the purpose of making, using, offering to sell and selling the drug covered by the patent for the purpose of treating HCC and RCC in humans within the Territory of India. The Single Judge rejected Bayer’s contention and held that compulsory licence holder cannot be deprived of his rights under Section 107A of the Act. The Single Judge differentiated between the extent of Natco’s rights under the compulsory license and under Section 107A of the Act. The Single Judge observed that the condition of compulsory licence issued to Natco is for making, using, and selling the drug covered by the patent for the purpose of treating HCC and RCC in humans within the territory of India, whereas the purpose of sale under Section 107A of the Act is different and is only for obtaining the regulatory approvals under the laws of India or in a country other than India. Thus, the Single Judge held that the grant of compulsory licence would not come in the way of Natco exercising its rights under Section 107A of the Act as a non-patentee.

The Single Judge thus disposed of the instant writ petition and commercial suit by directing that Natco and Alembic are entitled to export the patented invention for the purposes of Section 107A of the Act subject to both Natco and Alembic filing an affidavit by way of undertaking of their respective Director duly supported by the Resolution of the respective Board of Directors, with advance copy to the counsels for Bayer, to the effect that they, during the term of the respective patents, will not export the respective patented invention for purposes other than those specified in Section 107A of the Act. The Single Judge also directed that Bayer has the liberty to take appropriate proceedings if it makes out a case that the exports effected or to be effected by Natco and/or Alembic were or are for purposes other than those specified in Section 107A of the Act.