Intellectual Property Rights

Bayer Corporation v. Union of India

AIR 2014 Bom 178; 2014 (60) PTC 277 (Bom)

Facts

The Controller of Patents granted Natco Pharma a compulsory licence for Bayer’s patented cancer medicine sorafenib tosylate.
The IPAB substantially upheld that decision and increased the royalty payable to Bayer from 6% to 7%.
Bayer challenged the IPAB order before the Bombay High Court.
Bayer argued that:
Natco had not made adequate voluntary-licensing efforts;
the public’s requirements should include supplies made by Cipla;
the drug’s price was commercially justified;
importation constituted adequate working in India;
the authorities had misapplied Section 84.
Natco and the Union of India defended the compulsory licence.

Whether the Controller and IPAB had legally applied the grounds under Section 84.
Whether unauthorised Cipla sales could be counted in determining public availability.
From whose perspective reasonable affordability should be assessed.
Whether importation necessarily satisfied the requirement of working in India.
Whether the High Court should interfere with the compulsory-licence findings.

Judicial review does not require the High Court to rehear every factual issue as a fresh patent appeal.
Interference is justified where the authority:
applies an incorrect legal test;
ignores material evidence;
reaches a perverse conclusion;
violates procedural fairness.
Section 84 permits a compulsory licence where reasonable public requirements are unmet, the invention is unaffordable or it is not worked in India.
Affordability must be examined primarily from the standpoint of the public requiring the product.
Supplies from an unauthorised infringer cannot ordinarily fulfil the patentee’s statutory obligations.
Importation may amount to working in appropriate circumstances, but there is no automatic rule.
The scale, reasons for import, availability and affordability remain relevant.

Natco had approached Bayer for a voluntary licence and received a rejection.
The authorities were entitled to find that further repetitive efforts were unnecessary.
Bayer’s evidence showed that only a very small fraction of patients who required the medicine had access to it through Bayer.
Bayer argued that Cipla’s generic sales increased total availability.
The Court rejected the suggestion that a patentee could rely on a party it simultaneously accused of infringement.
Section 84 focuses upon whether the patentee and its authorised arrangements have met the public’s requirements.
The Court also upheld the affordability analysis.
A medicine may be commercially valuable and expensive to develop, but “reasonably affordable” cannot be judged only from the patentee’s business perspective.
The purchasing capacity of the Indian public was central.
On working, the Court declined to create an inflexible rule that every patented product must be locally manufactured.
Importation may sometimes be sufficient, especially where local production is impracticable.
Bayer had not adequately explained why its limited imports and high-priced supply should be treated as sufficient working.
The authorities had examined the relevant evidence and adopted a legally permissible view.
Judicial review did not permit substitution merely because Bayer preferred another interpretation.

The Bombay High Court dismissed Bayer’s challenge and upheld the compulsory licence.
It confirmed that Cipla’s allegedly infringing sales could not be counted in Bayer’s favour.
It approved the public-centred affordability test and the fact-sensitive approach to working through importation.
Use this case for: courts will uphold a properly reasoned compulsory licence where the patentee’s authorised supply is inadequate, unaffordable and insufficiently worked, even if unauthorised generics are present in the market.