Bayer Corporation vs Union of India

Author- Tishika Mittal, UPES

CASE DETAILS

       i)            Judgement Cause Title / Case Name

 Bayer Corporation v. Union of India & Ors.

     ii)            Case Number

SLP(C) No. 030145 of 2014

   iii)            Judgement Date

15 July, 2014

 

    iv)            Court

Bombay High Court

 

      v)            Quorum / Constitution of Bench

Judge Mohit S. Shah

Judge M. S. Sanklecha

    vi)            Author / Name of Judges

Judge M. S. Sanklecha

  vii)            Citation

WRIT PETITION NO.1323 OF 2013

viii)            Legal Provisions Involved

Constitution of India- Article 226

Patents Act 1970- 83 & 84

TRIPS agreement- Article 27

Doha Declaration on TRIPS and Public Health

INTRODUCTION AND BACKGROUND OF JUDGEMENT

Bayer Corporation vs Union of India is a landmark case concerning the application of compulsory license under Section 84 of the India Patent Act, 1970. The case addresses the interplay between patent rights and public health in India. This case arose from Bayer’s challenge against the grant of a compulsory license to Natco Pharma for its patented drug, “NEXAVAR” used for treating patients suffering from kidney and liver cancer. Natco Pharma was granted a compulsory license by the Controller General of Patents, Trademarks, and Designs. Bayer challenged this decision before the Intellectual Property Appellate Board (IPAB) and later filed a writ petition before the Bombay High Court, which upheld the grant of the compulsory license.

FACTS OF THE CASE

Procedural Background of the Case

  1. Bayer Corporation applied for patent protection for their anticancer drug in India on July 5, 200,1 and later gained the patent on March 3, 2008.
  2. Natco Pharma Ltd. Applied for a compulsory license under Section 84 of the Patents Act, 1970 claiming that the petitioner’s drug was not sold at an affordable price in India.
  3. The Controller of Patents, Trademarks, and Designs issued the compulsory license to Natco Pharma Ltd on March 9, 2012.
  4. Bayer appealed this order before IPAB and the order of the Controller was confirmed by IPAB.
  5. The said decision Bayer challenged under Article 226 to the Bombay High Court, wherein the petition was dismissed on 15 July 2014 to uphold the judgment of IPAB.

Factual Background of the Case

  1. Bayer’s drug was being imported to India and was priced at ₹2,84,000 per month.
  2. Natco contended that the drug was not affordable to a large population of India and that Bayer was not manufacturing the drug in India.
  3. Natco proposed to sell the drug at ₹8,800 per month which will make it affordable to the population of India that Bayer was not able to make it accessible to.
  4. The Controller of Patents, Trademarks, and Designs granted the compulsory license to Natco directing it to sell the drug at ₹8,800 per month and pay a 6 per cent royalty to Bayer on conditions that Natco can only sell the drug in India and it has to supply the drug to at least 600 patients each year free of charge.

LEGAL ISSUES RAISED

  1. Whether the Bayer Corporation’s patent satisfies the requirements under Section 84 of the Patents Act, 1970 to have a compulsory license.
  2. Whether failure to manufacture the drug in India was a failure to work the patent in India.

PETITIONER / APPELLANT’S ARGUMENTS

The counsels for Bayer submitted that:

  1. The compulsory licence to Natco Pharma was provided without any jurisdiction as the pharma company did not make genuine efforts to receive a voluntary license from Bayer Corporation.
  2. The patented drug was available in India by importing the drugs and it was made available at reasonable rates through Bayer’s Patient Assistance Program.
  3. The authorities did not calculate Bayer’s research and development costs as they calculated the drug’s affordability.

The counsels for the Union of India submitted that:

  1. The drug was used by only a small percentage of patients due to which Bayer Corporation has failed to meet the reasonable requirements of the public.
  2. The price with which Bayer Corporation was offering the drug was beyond the reach of a significant part of the patients as the price was too high.
  3. Bayer Corporation was not manufacturing the drug in India, which did not satisfy the working requirement according to the Patents Act, of 1970.

RELATED LEGAL PROVISIONS

Constitution of  India

Article 226-  Power of High Courts to issue certain writs.

Article 226 of the Indian Constitution has conferred the High Courts with the power to issue writs for the enforcement of fundamental rights and “for other purposes.” This phrase has been construed to mean the enforcement of any legal right. The following are the types of writs that can be issued:

Habeas Corpus: This writ is used to ensure the release of a person detained illegally.

Mandamus: The writ of the high court asking the public official or public body to do a legal act.

Prohibition: An action that keeps a subordinate or a lesser court from trying to have their jurisdiction or even exercising it.

Quo Warranto: Refers to that form of remedy directed in making an inquiry upon the lawfulness of someone’s appointment or office in some office.

Certiorari: That writ nullifies the one being made and signed by some subordinate or a minor court.

Issuance of a writ under Article 226 rests in the judicial discretion of the High Court because it may opt to issue the writ or decide not to, but this is subject to the proper exercise of that discretion.

Article 226 is another very useful instrument for protecting citizen rights. An individual can petition against any actions of the state or public entities that are violative of their rights. On the other hand, the writ-issuing power of the High Court does not operate unlimitedly. For instance, no writ could be issued that could violate the provisions of the Constitution or any law.

In addition to the five traditional writs, the High Courts have also evolved other remedies under Article 226, such as public interest litigation, or PIL. Under this provision, people can bring cases before the court on behalf of the public. This has become an important tool for protecting the environment, social justice, and holding the government accountable.

Overall, Article 226 is a very powerful tool in the protection of citizens’ rights and the lawful action of the government. It is important, however, that this power is used responsibly and not in ways that would undermine the rule of law.

Patents Act, 1970

Section 83- Section 83 of the Patents Act, 1970 broadly mentions the guiding principles for working of patented inventions in India. Thus, Section 83 mentions that patents are not granted as mere rewards for the inventors, but ascertains further that their invention must be worked to the fullest extent possible, for commercial purposes in India itself and without unreasonable delay.

It would be described briefly as below:

Commercial Working: Patents are meant to encourage industrial growth and should be worked in India to meet the reasonable needs of the public. In other words, the patented articles should be reasonably available.

No Monopoly on Importation: Patents should not be allowed to enjoy merely a monopoly to import the patented article. It is about production in India and availability in the country.

Balance of Interests: A patent system is one which balances the rights of the patent holder against the broader public interest. The latter includes facilitating technological innovation, transfer of technology, and socio-economic welfare.

Public Health and Nutrition: Patents should not unduly affect public health and nutrition. The state can take suitable measures to have access to healthcare facilities.

Abuse of Patent Rights. Patent holders should not abuse the rights granted or engage in other practices that unnecessarily restrain trade and adversely affect international technology transfer.

In short, Section 83 sets the stage for ensuring that patents serve their intended purpose of promoting innovation and industrial growth while also safeguarding public interest and preventing misuse of patent rights. It also forms a framework for the following sections of the Act dealing with compulsory licensing and other mechanisms to ensure the working of patents.

Section 84- Section 84 of the Patents Act, 1970 deals with Compulsory Licence. This means that a third party can utilize a patented invention without the license of the owner of the patent, subject to certain conditions, to ensure the working of patented inventions in India so as to satisfy public requirements to prevent abuse of patents.

Applicant: Any “interested person” is allowed to apply for a compulsory license, even if that person already enjoys a license under the patent.

When may one apply? An application may be made three years after the patent has been granted.

The Controller may issue a compulsory license where any of the following grounds are established:

Satisfies reasonable requirements of the public: Meaning the invention is patented, but not available to the public in sufficient quantities or reasonable prices.

The patented invention is not worked in India: The invention is not being manufactured or used in India to a reasonable extent.

The patented invention is not available at a reasonably affordable price: The price of the patented product is beyond the means of the common man.

Controller takes the following considerations to arrive at the decision on whether a compulsory license is granted or not

  • The nature of the invention
  • The period elapsed from the date of the grant of the patent
  • Efforts taken by the patentee to work on the invention
  • The applicant’s capacity to work on the invention
  • Whether the applicant sought a license from the patent owner on reasonable terms

Terms that the compulsory license will take, in case granted, to be:

  • The scope of using the invention
  • Duration of the license
  • Payment of royalties to the patent owner

The objective of Compulsory licensing is to:

  • Prevent patents as a means of monopoly
  • Enable the exploitation of patented inventions commercially for public advantage
  • Promote access to essential products and technologies at affordable prices

Section 84 is one of those provisions that seems to balance patent rights with public interest. The use of patents must be seen as a tool to promote innovation and industrial development, rather than the creation of monopolies to bar access to basic goods and technologies.

JUDGEMENT

RATIO DECIDENDI

  1. The Bombay High Court supported the decision of IPAB, ruling that Bayer Corporation’s patented drug did not meet the criteria for exclusivity as stated under Section 84 of the Patents Act, 1870.
  2. The High Court justified the grant of the compulsory license to Natco Pharma Ltd. by saying the patented drug was sold at a very high price not making it accessible to a large fraction of patients.
  3. The court, moreover, ruled that unless the locally manufactured drug was not possible, imports could serve to satisfy the requirement of work.

OBITER DICTA

  1. The court emphasized that patent rights need to be balanced with public health issues, particularly in drug-saving lives.
  2. It further added that although intellectual property rights exist to encourage innovation and a person’s intellect, the same should not hinder access to essential medicines.

CONCLUSION & COMMENTS

The case of Bayer Corporation vs Union of India has become an important precedent in Indian patent law, emphasizing the country’s commitment to the health of its people over corporate patent rights. The case affirmed the approach of the country toward compulsory licensing while keeping in line with the TRIPS agreement and public health. It has strengthened the stand of India as a nation prioritizing affordable medicine and making it accessible to as many of its people as it can.

REFERENCES

Important Cases Referred

  1. Novartis AG v. Union of India (2013) – Addressed the issue of patentability of pharmaceutical drugs under Section 3(d) of the Patents Act.
  2. Merck & Co. v. Cipla Ltd. (2009) – Related to patent infringement in India’s pharmaceutical sector.
  3. Natco Pharma Ltd. v. Bayer Corporation (2012) – The original decision by the Controller of Patents granting the compulsory license.

Important Statutes Referred

  1. The Patents Act, 1970 (as amended in 2005)
  2. The TRIPS Agreement (1995)
  3. The Doha Declaration on TRIPS and Public Health (2001)
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