This article has been written by Nishant Kumar, pursuing Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution and has been edited by Oishika Banerji (Team Lawsikho).
It has been published by Rachit Garg.
Bayer corporation vs Natco pharma Ltd (2013) is a landmark case in the history of the long-standing disputes over compulsory licensing in the pharmaceutical sector of India. Compulsory licensing is considered to be the grant of licence to a third party for a patented drug by the government without the consent of the patentee.
Bayer corporation is a global pharmaceutical company, it deals with the making of Aspirin drugs. Whereas Natco pharma is an Indian pharmaceutical company that deals with the production and manufacturing of cheap and affordable drugs. The reason for the dispute between the two companies was a drug named Nexavar “Sorafenib tosylate” which is used to treat kidney cancer.
In this case, it has been discussed how Natco pharma filed an appeal for the grant of compulsory licence for the drug “Nexavar” of Bayer corporation before the Intellectual Property Appellate Board (‘IPAB’) and after a long range of disputes at the end, India’s first compulsory licence was granted to Natco pharma. This article provides a case analysis of this landmark decision.
Bayer Corporation vs Natco Pharma (2013)
Bayer Corporation vs Natco Pharma (2013) was the first case in India in which a compulsory licence was granted to Natco Pharma for a Kidney cancer drug named “ Nexavar”. Natco’s application for a compulsory licence for Nexavar was filed before the Controller General of Patents in 2011 in accordance with Section 84(1) of the Indian Patents Act, 1970. The judgement that was delivered on March 9, 2012 stood in favour of Natco as the licence was granted and against the same, Bayer had appealed before the IPAB. Bayer sought a stay on the decision of the Controller but the same was not entertained as IPAB’s decision stood in alignment with that of the Controller.
Brief facts of the case
Following the grant of the compulsory licence, Natco was directed by the Controller to manufacture and sell the patented drug thereby paying a royalty at 6% of its net sales of the patented drug under its brand name, to the original patent holder. The drug was allowed to be sold at a price of Rs.8800/- for 120 tablets for a month-long treatment. The grant of compulsory licence to Natco was considered to be non-exclusive, non-assignable and for the balance term of the patent. Being aggrieved to the afore-mentioned order, the appeal was sought by Bayer before the IPAB who on 4 March 2013 had upheld the order dated 9 March 2012 of the Controller thereby granting the compulsory licence to Natco. The only difference that was noticed in the judgement was a rise in the royalty payable by Natco to the petitioner (6 to 7% of the sales of the patented drug), under its brand name. The timeline of events that have taken place concerning this case has been provided hereunder:
- 1990: A drug named Sorafenib Tosylate was invented by Bayer Corporation.
- 1999: A patent application was made by Bayer in the United States.
- 2000: Bayer filed a PCT International Application (Patent Cooperation Treaty).
- 2005: Bayer had launched the drug (Gleevec) and was selling it under the name “Nexavar”.
- 2008 (March): Patent was granted to Gleevec in India to Bayer.
- 2010: The generic version of the drug was being sold by another drug manufacturer, M/S Cipla.
- 2011 (July): Natco had then applied for a compulsory licence before the Controller of Patents to manufacture and sell a generic version of Nexavar in accordance with Section 84(1) of the Indian Patent Act, 1970 (amended in 2005).
- 2012 (March): Natco was granted the first compulsory licence in India thereby initiating the sale of a generic version of Nexavar.
- 2012: Further, in the same year, Bayer had appealed against the decision of the Controller, before the IPAB, which further went before the Bombay High Court with the contention that the order delivered stands in detriment to the international patent system thereby being responsible for endangering research work.
Issue of the case
The issue of this case was whether compulsory licences be granted to a generic medicine producer while the same is already patented and used by a registered user. The issue had resulted in many big questions before the pharmaceutical sector as have been pointed out hereunder.
- Whether Bayer Corporation had failed to abide by the reasonable requirements of the public with regard to the drug?
- Whether Nexavar was made unavailable to the public at a reasonably affordable price, thereby making it accessible?
As we have understood previously, the concept of compulsory licence has been given a green signal under the Trade related aspects of Intellectual property rights agreement (TRIPS), which is an international agreement establishing a uniform series of rules and regulations concerning intellectual property rights. The grant of compulsory licence reflects proof of the exception that has been introduced under the TRIPS agreement. In accordance with the patent laws in India, the provisions of compulsory licensing range from Sections 84, 86, 89 to 93. This regulation has been given room to aid the government in improving access to the invention that is being enjoyed by the patent holder. The compulsory licence also helps in limiting the misuse of the monopoly rights that are attained by the patent holder upon being conferred with registration for his invention.
Contentions of the parties
The arguments that were extended by the petitioner and the respondent, have been provided hereunder.
Arguments submitted by the petitioner
Natco Pharma argued that Bayer was failing in its arguments under Section 84 (b) of the Indian Patent Act,1970. This was because the company was offering the drug at an unaffordable high price to the public thereby restraining access to the same. Natco Pharma was of the opinion that if they are granted a compulsory licences, they can resolve the issue of accessibility and affordability when it comes to public need and welfare in terms of medicines.
Arguments submitted by the respondent
The argument from the side of Bayer corporation was that they believed that this whole trend of issuing compulsory licences violates Section 83 of the Indian Patents Act,1970 as it degrades research and development. They not only believe this to be against the nature of businesses but they also believed it to be against many international treaties as it violated Article 27.1 of the TRIPS agreement of which India is also a part. Another prime contention raised by the respondent was a restriction in the process of research and development that will be initiated if a compulsory licence is given its way.
Judgement of the case
Ratio Decidendi – “The court ‘held’”
The final judgement of the controller of the patents was to grant a compulsory licence to Natco Pharma for the drug “Nexavar”. The controller gave his judgement under Section 84 of the Patents Act of 1970 because Bayer wasn’t able to meet any of the requirements of the section.
- The first requirement given in Section 84 (1)(a) was not being fulfilled as the reasonable requirements of the public were not being fulfilled with regard to this drug.
- The second requirement given in Section 84(1)(b) was the main issue as the price of the drug was unaffordable by the majority of the public and this is a big issue to address as in India the biggest problem is of affordability as only a very minor percentage of the population is actually privileged to afford these costly medicines and benefit from them while the majority of them cannot.
- The third requirement given in Section 84(1)(b) that wasn’t fulfilled was that the patented invention shall be worked in the territory of india.
Also, the controller rested heavy weight on Article 5(A)(2) of the Paris Convention to justify his reasoning i.e each country has the right to grant a compulsory licence to benefit the general public. There were also many requirements set by the controller which cannot be breached by Natco, for example, the monthly treatment price of the drug should not exceed the limit of Rs.8880/-. Bayer has to pay 7% of the medicines net sale etc.
The court observed that there would always be a play of Audi Alteram Partem i.e both sides would be heard and the IPAB also stated that before filing for the compulsory licence both parties should make significant efforts and settle terms for a potential voluntary licence. The IPAB also made a remark when CIPLA was in the picture that the sales of the first party can only be shown and not of any other party.
There is no doubt that this was a landmark case and it was focused on the welfare of the people but was the problem really solved from its roots? Didn’t it affect India in any negative manner? Wouldn’t it influence foreign investments in India and hamper the economic condition?
These are all the questions that were left behind with this judgement. Because the main problem wasn’t just granting compulsory licences to the third parties it was to ensure that in each and every circumstance the benefit of the people and the society is favoured. Suppose in this case the licence was granted to Natco pharma but will now won’t it affect their will to spend tons of money in research and development and create a new drug so that its licence is also given to some other company. So the problem here to be solved was to create a balance between the welfare of the people and also the economic interests of the country.
After all this lets put some light on the “Doha Declaration”. The aim of the Doha Declaration was to achieve reform in the international trading system by reducing trade barriers. This case was the one which motivated others to file for compulsory licences but to date, we have not seen a second in that race.
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