The Delhi High Court recently adjudicated on the issue of whether generic companies can export patented products for experimental purpose, in an expansive interpretation of Section 107A of the Indian Patents Act, 1970 (the ‘Act’). Section 107A, which relates to what is referred to as ‘the Bolar Provision’, was introduced via the Patents Act (Second Amendment) Bill, 1999. The provision sought to ensure the prompt availability of patented products, particularly generic drugs, immediately after the expiry of the patent term. Unsurprisingly, the Bolar provision has always been a bone of contention between generic companies and innovator companies. A Division Bench of the Delhi High Court held that Section 107A permits export of the patented invention solely for uses that are reasonable and related to the development and submission of information required under law, either in India or abroad. The ruling came through a common order issued on 4 April 2019 in two appeals filed by Bayer Corporation Vs. Union of India (WP (C) 1971 of 2014) and Bayer Intellectual property GMBH vs Alembic Pharmaceuticals Ltd (CS (COMM) No. 1592/2016).
Background of the case
In 2011, Bayer filed a suit [CS(OS) No. 1090/2011] for injunction against Natco from making, importing, selling, offering for sale, ‘Sorafenib’, ‘Sorafenib Tosylate’ (Bayer drugs”) or any generic version, etc., which was a subject matter of Bayer’s Patent No. IN 215758. In 2012, while the suit was pending, Natco was granted a compulsory license against the patent under Section 84 of the Act. The compulsory license was granted solely for the purposes of making, using, offering to sell and selling the drugs covered by the patent within India. However, besides manufacturing the drug for the Indian market, Natco manufactured the same product for export outside India, against which Bayer filed a writ petition. Bayer argued that the export was contrary to the terms of the compulsory license, and thus constituted an infringement of their patent. The Court directed the Customs Authorities to ensure that no consignment from India covered by the compulsory license was exported. Later, Natco applied for permission to export 1kg of Sorafenib for conducting clinical trials under Section 107A of the Act. The application was contested by Bayer, arguing that the export would be a commercial sale, and thus contrary to Section 107A. Bayer contended that Section 107A specifically mentions the word “sale” and “import”, but the legislature had consciously excluded the term “export”.
In Alembic’s case, Bayer sued Alembic for manufacturing and exporting ‘Rivoroxaban’ to the European Union and United States, which it claimed infringed Bayer Patent No. IN 211300. Alembic denied Bayer’s allegations and stated that they had not commercially launched Rivoroxaban and had only exported it under Section 107A. Bayer argued that Alembic had exported at least 90 kg of Rivoroxaban worth Rs. 3 crore, and export of such quantity could not lie within the meaning of Section 107A.
As both the cases involved the common question of the interpretation of Section 107A, the Court decided to hear both the matters together.
The first Delhi High Court decision
A Single judge of the Delhi High Court disposed off the writ petition and the commercial suit filed by Bayer against Natco and Alembic on March 08, 2017. The judge held that the intention of the legislature in interpreting Section 107A clearly does not exclude sale outside India, and that “export” of the patented invention solely for experimental purpose was covered and hence would not amount to patent infringement. This decision was appealed before a Division Bench of the Delhi High Court.
Bayer argued that Section 107A constitutes an exception to Section 48 of the Act (which discusses the rights of a patentee) and does not confer an independent right. It said that the nature of Section 107A as a proviso/exception could be seen from its placement in the statute, which shows that it was intended to be used as a defence in a suit for infringement. Bayer also argued that since the ‘act of selling’ in Section 48 refers to sale in India only, and that Section 107A cannot enlarge the scope of this term and grant an additional right to the defendant. Bayer asserted that the expression “in a country other India” refers to the submission of information, such that the data generated in India may be submitted in different countries.
Further, Bayer argued that the expression “export” was purposely mentioned in Section 84, 90(1) and 92A of the Act. The absence of the same in Section 107A indicates that the omission was deliberate. Specifically, the term “importing” was included in Section 107A by the Patents (Amendment) Act, 2005, without any mention of the word “export” or “offering for sale”, clearly indicating that the legislature did not intend to include these activities within its ambit. The legislative intent behind Section 107A was only to ensure the availability of the drugs in India only after the expiration of the patent term and not abroad.
Bayer relied on Article 30 of the Agreement on Trade Related Aspects of Intellectual Property (TRIPS) to argue that allowing export under Section 107A would violate the treaty provision, which allows only for limited exceptions to patent rights. Bayer also contended that if hypothetically, Section 107A were to permit export, the burden of proof must fall on the non-patentee to demonstrate that the export is for the purposes mentioned in Section 107A. Bayer argued that the phrase “reasonably related” in Section 107A implies that compliance with the foreign regulatory regime must be proven and adjudicated upon by the Court. Bayer also contended that the single Judge failed to even consider the quantities required by the regulatory regime to which information was to be submitted.
Contentions of Natco and Alembic
Natco denied Bayer’s allegations that under the guise of the granted compulsory license, they were exporting the formulation to different countries. Natco argued that rights under Section 107A and Section 84 were independent rights and could be exercised by the same person. It said that Section 107A was not subject to the operation of Section 84 and there was no relationship between the two. It argued that Section 107A operates on the submission of data generated in the development of the drug to regulatory authorities, while Section 84 operates on the marketing of the patented product for commercial purposes. Natco and Alembic argued that the rights under Section 48 were subject to the acts exempted under Section 107A. Natco also said that Section 48 did not prohibit export if the person concerned satisfied the conditions of Section 107A. According to Natco, TRIPS created an exception under Article 30 by permitting regulatory activities before the expiration of the patent, and that several countries including India, Canada and the US had changed their patent laws to carve out such exceptions.
Natco contended that the use of terms “sell“, “import” and “construct” permit all range of transactions covered by the provision. Natco and Alembic also contended that Section 107A does not impose any restrictions on the amount of the patented product to be exported as long as all such quantity is utilized solely for the development and submission of information required under law.
The Division Bench Decision
The Division Bench upheld the single Judge’s interpretation to include export within the ambit of Section 107A. It held that sale, use, construction of patented products in terms of Section 107A of the Act for purposes both within the country and abroad is authorized and legal. The Court rejected Bayer’s argument that Section 107A constitutes an exception. It also observed that Section 107A was not made subject to other provisions of the Act, endorsing Natco’s argument that unlike Section 48, which deals with the rights of the patentee that are subject to the other provisions of the Act. Section 107A is an independent provision and facilitates research and progress in fields covered by patents. The Court also mentioned that TRIPS recognised the need for Bolar-like provisions, which enables research and development in numerous ways.
The Court said the term “export” is used in different contexts in Sections 84, 90 and 92A. It said that it could not be conclusively determined that Parliament intended to per se exclude ‘export‘ from the sweep and width of the term “sale‘ in Section 107A. The Court also observed that the scope of sale cannot be narrowed down to sale in India only. It also rejected Bayer argument that it is only the ‘information’ that can be sold or exported, and not the patented invention. The Court further noted that many countries require experimentation or research to be carried on in their soil, and it would be undesirable to dictate the behaviour and legal requirements of other jurisdictions by confining the research exception within India.
The Court noted that an unregulated export of patented invention can be troublesome to the patent owner and can result in exploitation of the rights of the patentee. However, it also held that the volume of the patented product and its use for research and development of information cannot be prescribed in one norm. The Court did not agree with the approach of the single judge in permitting the export of 1000 to 2000 tablets without any inquiry. In this regard, the Court enumerated a list of factors to be considered when deciding such cases. However, the Court made it clear that the list was not exhaustive and that other factors relevant to the subject should also be considered. The Court also noted that it is necessary for Indian Courts to be aware and cognizant of TRIPS, Doha Declaration and WHO guidelines, while considering the assertion of property rights which it has to enforce.
The Court found that the dispute about the sale, i.e. whether it is legitimately related to the reasonable end use or purpose of research etc., is the subject matter of a civil suit in which the full range of reliefs can be granted based on the circumstances and the evidence.
The Court dismissed the appeal filed by Bayer in the writ petition and directed that such disputes were not ordinarily the subject matter of public law proceedings and the parties should pursue civil remedies instead.
The decision of the Division bench of the Delhi High Court has balanced the rights of patentees with the interest of non-patentees by providing a list of the factors to be considered in cases involving the applicability of Section 107A. The list will ensure that exports made for research and experimental purposes are not restricted, while at the same time safeguard rights of patent holders. Proper enforcement, however, is key, in order to avoid abuse of the provision by either side. The decision also confirms that ‘end use’ and the ‘purpose’ of the export is the decisive factor for qualifying to fall under Section 107A. Considering that India has a well-developed generic pharmaceutical industry, this decision will help generic companies to speed up the regulatory approval process before the expiry of the patent term.