India: Compulsory Licence Decisions: A Comparative Study Of Facts

Last Updated: 4 March 2014
Article by Swati Varshney

It is now been almost two years the first compulsory license was granted by the Controller General of India to Natco Pharma Ltd., an Indian generic drug manufacturer. The first application for Compulsory License under Section 84(1) of The Patents Act 1970 was filed on July 29, 2011 in respect of the Patent No. 215758 granted on March 03, 2008 to Bayer Corporation., a US based company for the salt 'Sorafenib tosylate', sold under the brand name NEXAVAR for the treatment of the advanced stages of kidney and liver cancer.

The applicant Natco Pharm Ltd., approached the Patentee with a request for a voluntary license to manufacture and sell the drug as per requirements prescribed in Section 84 of the Indian Patents Act, 1970 the, which did not materialize. The Applicant proposed to sell the drug at a price of Rs.8800/- for one month therapy as compared to the price of about Rs.2,80,428/-, which was being charged by the Patentee at the time of making the Application.

Since at the time filing first application for CL, the three years from the date of grant of Patent had already been lapsed and the Applicant was also a person interested within the meaning of the Act. Upon arriving at a conclusion that a prima facie case under Section 87(1) of the Act has been established, vide Controller General's (CG) order dated August 9, 2011. After a series of procedural events and a three day hearing, the CG found in favour of Natco on all counts and issued a license in their favour. India's first CL was granted to Natco Pharm Ltd., by an order dated March 9, 2012. The Patentee Bayer Corporation was disappointed with the said decision, therefore filed an Appeal against the Controller General decision before the Intellectual Property Appellate Board (IPAB) on May 4, 2012. On March 4, 2013 the Intellectual Property Appellate Board (IPAB) issued their order and upheld the country's first compulsory licence. The only benefit the Patentee got from IPAB decision is hiked in royalty from 6 per cent to 7 per cent.

Inspired by the decision of the Controller General of Patents as well as the IPAB, a Mumbai-based BDR Pharmaceuticals had filed an application for CL on the very same day of the IPAB decision in favour of Natco (4th March 2013), under Section 84 of the Patents Act, 1970, with Patent Controller's office in Mumbai, seeking the grant of a compulsory licence for patent number 203937 granted to Bristol Myers Squibb (BMS) on November 16, 2006 for the drug Dasatinib used in the treatment of a chronic myeloid leukaemia (CML) patient. In its application, the BDR Pharmaceuticals had assured that the drug Dasatinib will be made available to the public at a proposed price of Rs.135 per tablet working out to Rs.8100 per month for the treatment of a chronic myeloid leukaemia (CML) patient which as compared to patentee's rate was very less to the patient.

As per the requirements of section 84 of the Indian patents Act 1970, BDR initially sent a request for a voluntary license to BMS, a multinational pharma company that owned the patent over Dasatinib, an anticancer drug on February 02, 2012. BMS responded with a series of questions (such as whether BDR had the necessary wherewithal to produce good quality API etc.) on March 13, 2012. BDR did not answer any of these queries, but filed a CL application on March 04, 2013 i.e. after a year of its initial request for voluntary licence.

Under Indian patent law, a CL applicant must first attempt to procure a voluntary license from the patentee. If this attempt does not succeed ordinarily within 6 months (as prescribed by the Indian Patent Law) of the initial request, the applicant is free to file a CL application.

In the notification dated May 04, 2013 issued by the Controller General that upon consideration a prima facia case under section 87 has not been made out for the application for CL under section 84 of the Act. Since, the applicant has not negotiated in good faith with the patentee in the prescribed time under the Indian patents Act. On receiving this notification, on May 10 2013 and May 13, 2013, the applicant replied to the patentee letter dated March 13, 2012 as well as replied to the Controller's notification and requested for hearing, respectively. The applicant also filed petition(s) for condonation of delay in responding procedural irregularities. After filing written submissions followed by other procedural actions a formal Hearing was held on September 16, 2013.

After the Hearing, the Controller General of Patents, Chaitanya Prasad has issued an order dated 29-10-2013 stating that the applicant did not follow the scheme of the law as well as the procedure mandated by the law. It has been held that BDR had not really made any sincere attempt to procure a CL and therefore could not be said to have satisfied the statutory requirement prescribed under the Indian Patents Act. The application was dismissed at the threshold itself. The application for compulsory licence, along with all the petition(s) for condonation of delay/irregularity, is hereby rejected, Controller General of Patents, Chaitanya Prasad, in his order dated October 29 2013.

After the first Compulsory License issued in favour of a Generic company, the Indian Patent office gained a negative impression internationally and alleged to be worked under impression of Government of India, since the Controller General of Patents comes under Ministry of commerce and industry, Department of Industrial policy and promotion. Now the second order of Controller General of Patents rejecting an application for CL has been issued which overturns the impression posed by the India's first CL.

These two orders issued by the Controller General of Patents came in difference of one and half years, are contradictory in nature. On analysing the facts of both the matters we can see the decisions in both the cases are purely based on the facts and requirements prescribed under Section 84 of the Indian Patents Act, 1970 and not under influence of any Governing body. In future, companies seeking a CL should demonstrate that there were adequate negotiations done by companies with the innovators for seeking a voluntary licence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Swati Varshney
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