India: Bolar Exemption in Indian Patent Law: Is Section 107A(a) an Exception or an Enabling Provision?

Last Updated: 30 March 2017
Article by Dinesh Kumar Sharma

Section 48 of the Patents Act, 1970 prescribes the rights of patentees, which on conferment of patent, vest exclusively in the patentee.  In particular, a patent granted under the Act shall confer upon the patentee where the subject matter of the patent is a product, the exclusive right to prevent third parties, who do not have his consent, from the act of making, using, offering for sale, selling or importing for those purposes that product in India. Similarly, a process patent confers upon the patentee, the exclusive right to prevent third parties, who do not have his consent, from the act of using that process, and from the act of using, offering for sale, selling or importing for those purposes the product obtained directly by that process in India.

Since there is no provision in the Act prescribing as to what is infringement of patent rights or what acts constitute infringement of patent rights, axiomatically, exercise of any of said exclusive rights conferred on the patentee by a non-patentee who do not have patentee's consent would amount to infringement of the patent.

However, Section 107A(a) of the Act, commonly referred to as the "Bolar" provision exempts certain acts related to the development and submission of information required under Indian law or the law of any other country from being considered as infringement of the patent. Section 107A reads as follows:

"107A. Certain acts not to be considered as infringement: — For the purposes of this Act,—

  1. any act of making, constructing, using, selling or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product;
  2. importation of patented products by any person from a person who is duly authorised under the law to produce and sell or distribute the product,

shall not be considered as a infringement of patent rights."

Statutory Evolution

The so-called "Bolar Exemption" was carved out by the "Drug Price Competition and Patent Term Restoration Act, 1984 (informally known as the Hatch-Waxman Act) as an exception from the infringement of the patentee's rights, for certain acts relating to manufacture/use of the patented invention solely for uses reasonably related to the development and submission of information to a regulatory agency.

The Hatch-Waxman Act essentially overturned the ruling of the US Court of Appeals for the Federal Circuit in Roche Products, Inc. vs. Bolar Pharmaceutical Co., Inc.  [733 F.2d 858 (Fed. Cir. 1984)] wherein the Court held, inter alia, that the competitor Bolar's intended use of Roche's patented compound Flurazepam Hydrochloride to derive FDA required test data for approval of its generic drug would be an infringement of the patent. The Court of Appeals for the Federal Circuit reversed the decision of the US District Court that had rejected the patent infringement action against Bolar Pharmaceutical and paved the way for what is today known as the "Bolar Exemption".

Article 30 of the TRIPS Agreement entitles the member countries to provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking into account the legitimate interests of third parties. Pursuant to India's accession to the TRIPS Agreement, Patents Act, 1970 was amended to, inter alia, introduce an exception to the rights conferred by a patent. The safe harbor exception was first contemplated under clause 51 of the Patents (Second Amendment) Bill, 1999, which provided for introduction of Section 107A in the Act[1].

Section 107A was introduced in the existing Act by way of Patents (Amendment) Act, 2002 through Section 44 thereof. Insertion of this provision into the Act was recommended by a report of the Joint Parliamentary Committee (JPC) being set up to recommend changes to the patent regime. According to said report being submitted by the JPC to the Parliament on December 19, 2001, "This provision has been made to ensure prompt availability of products, particularly generic drugs, immediately after expiry of the term of the patent. The amendment in this clause has been made to make a provision in consonance with the Bolar provisions at the global level."

Significantly the text of Section 107A(a) of the Act, as introduced by Section 44 of the Patents (Amendment) Act, 2002, was materially different from the one proposed under the 1999 Bill in that Section 107A(a) as enacted did not confine the safe harbour exception to any specified period and that said provision was also widened to include 'constructing' or 'selling' a patented invention and the language of the provision was changed to expressly include uses reasonably relating to submission of information required by laws outside India[2]. Section 107A(a) of the Act was subsequently amended in 2005 to bring even the act of "importing" of a patented invention within its ambit and since then it has remained untouched.

Section 107A(a) of the Act is noticeably similar to Section 55.2(1) of the Canadian Patent Act[3]. The safe harbour provision of Canada was subject matter of WTO disputes raised by European Communities and its member states with respect to its compliance with the TRIPS Agreement (in WT/DS114/R dated 17.03.2000)[4]. However, Disputes Settlement Body (DSB) finally upheld the exceptions offered by Section 55.2(1) of the Canadian Patent Act as conforming to the TRIPS Agreement. Importantly, India had supported the stand of Canada and contended that exceptions in the Canadian Patent Act were legitimate exceptions within the meaning of Article 30 of the TRIPS Agreement. Interestingly, India, albeit supporting the compatibility of the Canadian Law with the TRIPS Agreement, did not allow regulatory approval activities in its own law as it still benefited from a transitional period under Article 65 of the TRIPS Agreement.

Examining Jurisprudence

While Section 107A(a) provides some protection to generic drug manufacturers when preparing their products for regulatory approval, the exact contours, reach and ambit of this provision largely remain uncertain. Until recently, Indian case law in this area was almost sparse.

The Hon'ble Single Judge (SJ) of the High Court of Delhi (DHC) in the landmark case of Bayer Corporation & Ors. vs. UOI & Ors. (2009) addressed the controversy whether there is a "patent linkage" in terms of the Patents Act, 1970 and the Drugs and Cosmetics Act, 1940. Bayer Corporation filed a writ petition seeking directions to, inter alia, restrain the Drug Controller General of India (DCGI) from proceeding with the application made by Cipla Ltd. to grant it a drug licence to manufacture, sell and distribute its drug "Soranib" which was allegedly a "spurious" generic version of its patented drug "Sorafenib Tosylate". Bayer relied on Section 2 of the Drugs and Cosmetics Act, 1940 and Section 156 of the Patents Act, 1970 to contend, inter alia, that drugs authorities are bound by patents, granted under the Patents Act, by virtue of Section 156 and therefore, they cannot, by conferring drug or marketing approval permit violation of patents validly granted.

However, the Court negatived Bayer's contentions and significantly held that given the disparate objectives of the Drugs and Cosmetics Act, 1940 and the Patents Act, 1970, both being complete and separate codes, there was no merit in Bayer's contentions that there was a "patent linkage". While expressing his concerns regarding undesirable results of such patent linkage, the Court observed that such linkage potentially undermines the "Bolar/Early Working" exception that encourages quick access to the post patent markets for generic medicines, which is a major public policy consideration in India, which faces a host of public health challenges. The Court finally dismissed the writ petition. Bayer's intra-court appeal (LPA No.443 of 2009) preferred against the SJ judgment too was dismissed by the Hon'ble Division Bench (DB) that fully concurred with the SJ. The controversy surrounding patent linkage was finally ended by the Hon'ble Supreme Court as it dismissed Bayer's Petition for Special Leave to Appeal (No. 6540/2010) preferred against the DB judgment, after taking into account the developments already occurred in the matter in the meantime like grant of marketing license to Cipla's drug "Soranib" by the concerned drug licencing authority and its consequent entry into the market.

Bayer Corporation vs. Union of India & Anr. [W.P.(C) 1971/2014], And Bayer Intellectual Property GMBH & Anr. vs. Alembic Pharmaceuticas Ltd. [CS(COMM) No.1592/2016]:  Reach and Ambit of Section 107A(a) Expanded!

Section 107A(a) came under judicial scrutiny in the case of Bayer Corporation (Supra), where the controversy to be addressed by the SJ of the DHC was whether the export of active pharmaceutical ingredient (API) by Natco Pharma Ltd. would fall within the affirmative defense to infringement of Bayer's patent as available by virtue of section 107A(a) of the Act. Bayer filed the writ petition seeking a mandamus to the Customs Authorities to confiscate and seize the consignments for export containing the products covered under the Compulsory Licence granted to Natco and further seeking a direction to all the Customs Ports to not allow exports thereof.

Factual Matrix

Natco was granted a compulsory license by the Controller General of Patents on March 9, 2012 under Section 84 of the Act to manufacture pharmaceutical products covered under Bayer's Patent No. 215758 relating to anti-cancer drug "Sorafenib Tosylate" on certain terms and conditions including that the license be used "solely for the purpose of making, using, offering for sale and selling the drug covered by the patent for the purpose of treating HCC and RCC in humans within the territory of India".

Bayer contended that Natco was manufacturing the product covered by the compulsory licence and exporting the same outside India in violation of the terms of the compulsory license and said export amounted to infringement of the patent within the meaning of Section 48 of the Act.

On May 23, 2014, with the consent of Bayer, the Court permitted Natco to export the drug sorafenib tosylate not exceeding 15 gm for development / clinical studies and trials. Natco again applied for permission to export 1 Kg. of API sorafenib to a Chinese Pharmaceutical Company for the purposes of conducting development / clinical studies and trials. Natco also produced a certificate from said company indicating that said company required 1 kg. of Sorafenib tosylate for the purposes of formulation R&D purpose and the sample was not intended for any commercial purpose. Further, Natco filed an affidavit stating that 1 kg. of API of the product in question was required for R&D purposes and for preparation of a trial batch of generic version. It was asserted that for seeking regulatory approval "Bio-availability, Bio-equivalence and stability studies" are required to be conducted and as per the Chinese Rules and Regulations, samples from three consecutive batches of production are required and, each batch would require 1-2 kgs of the API.

Bayer contested said application and contended, inter alia, that export in question was neither permitted in terms of compulsory license nor would fall within the scope of Section 107A(a) of the Act; use by a third party for development purposes would not entitle Natco to infringe its patent.

Judgment of SJ of DHC (November 5, 2014)

The SJ expansively interpreted Section 107A(a) and significantly held that the sale of patented product even outside India would fall within the scope of Section 107A(a), provided the said sale is reasonably related to development and submission of information as required under a law in force in India or outside India. Accordingly, it was held that Section 107A(a) of the Act expressly permits export and use of the patented product for submission as may be required by laws in force outside India. The Court permitted Natco to export 1 kg of API "Sorafenib" for carrying on the activities for obtaining regulatory approvals within the meaning of Section 107A(a) of the Act. The Court decided the issue involved after reviewing, inter alia, the history of the Bolar exemption in the U.S., India's accession to the TRIPS agreement, the introduction of Section 107A(a) in the Act in 2002 and its subsequent amendment in 2005.

Disposal of Writ Petition

Bayer, however, preferred an appeal (LPA No.804/2014) against said SJ order before the DB of the DHC and the same was disposed of by the DB expediting the hearing of the writ petition and by prohibiting export till the decision of the writ petition. The DB recorded the statement made by Natco that it will not export the patented product (Sorafenat) to China for any purpose whatsoever till the disposal of the writ petition.

On March 8, 2017, another SJ of the DHC disposed of said writ petition and suit CS(COMM) No.1592/2016 conjointly noting that said suit was also filed by Bayer Intellectual Property GmbH and Bayer Pharmaceuticals Ltd on the premise of Alembic being not permitted to per se export the drug  "Rivaroxaban" covered by its patent no. 211300 and as such they both involved the same legal question of interpretation of Section 107A[5].

The SJ interpreted Section 107A(a) even more expansively and held that the language of this provision permits exports from India of a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product.

At the outset, the Court noted that it is the purpose for which the acts referred to in Section 107A(a) are done which distinguishes, whether the acts constitute infringement of patent or not. If the said purpose is within the confines of Section 107A(a), the acts so done would not constitute infringement and the patentee cannot prevent a non-patentee from doing them. However, if the purpose of doing the acts of making, using, selling or importing a patented invention is not solely for the purposes prescribed in Section 107A(a), the said acts would constitute infringement of patent and patentee can prevent non-patentee from doing them.

Interplay of Section 107A(a) vis-ŕ-vis Section 48

The Court negatived Bayer's contentions, inter alia, that selling of patented invention outside India even if for purposes specified in Section 107A(a) would constitute infringement which can be prevented by patentee and that transfer from India to any other country can be only of information gathered / collected in India and required to be submitted under the laws of any other country for obtaining approvals for manufacture and sale of pharmaceutical products in that country. The Court held that it would be contrary to the natural / literal / textual interpretation of Section 107A(a) of the Patents Act to uphold Bayer's contentions. It was held that there is nothing in the language of Section 107A(a) to suggest that only the information generated / collected in India could be transported out of India and not the patented invention. The Court reasoned that the information generated in India, unless accepted under the law of any other country for granting regulatory approvals for manufacture, sale and import in that country, would be of no use.

Further, the Court incorporated fundamental rights into its decision by observing that the right of manufacturers / producers of medicines and of fine chemical producers, to make, construct and sell including by way of export, a patented invention, for the purposes prescribed in Section 107A(a) is a fundamental right protected by Article 19(1)(g) of the Constitution of India and such a fundamental right to export patented invention for the purposes prescribed in Section 107A(a) cannot be taken away or curtailed from mere absence of the word "export" in Section 107A(a) when the word selling used therein takes within its ambit selling in the course of export also.

The said judgment of SJ contains numerous significant observations concerning the true scope and purpose of Section 107A(a) and its interplay vis-ŕ-vis Section 48 of the Act. For instance, the said ruling interprets Section 107A(a) to stand on an equal statutory footing as Section 48 of the Act. The Court specifically observed:

"..The legislature also, in the year 2002, when incorporating Section 107A in the Patents Act for the first time, did not choose to incorporate it as a proviso to Section 48 or even in Chapter VIII titled "Grant of patents and rights conferred thereby" of the Act but rather chose to place it in Chapter XVIII titled "Suits concerning infringement of patents", alongside Section 107 titled "Defences etc. in suits for infringement" and to adopt the language in Section 107A, of acts mentioned therein not constituting infringement i.e. exclusive right to do those acts not vesting in the patentee....It follows that grant of patent under the Act does not confer on the patentee right to prevent others from making and selling patented product if solely for purposes prescribed in Section 107A. These are two independent provisions, admitting of no overlap or need to read one as a proviso (and consequently narrowly) to another...The rights conferred on non-patentees under Section 107A are to be interpreted following the same rules as the rights of a patentee and are not to be read narrowly or strictly so as to reduce the ambit of Section 107A, as is the rule of interpretation of statutes in relation to provisos or exceptions...Section 107A is not carving out an exception to the exclusive right conferred by grant of a patent."

Further, the Court took note of the latitude under the TRIPS Agreement to member countries, to conclude that there is nothing in the provisions of said Agreement, to suggest that reading the word "selling" in Section 107A(a) as including by way of export, would be in violation of the Agreement. While taking note that TRIPS Agreement specifically vests discretion in the member countries to adopt in their laws measures necessary to promote public interest in sectors of vital importance to their socio-economic development, the Court observed that even if it were to be held that clause (f) of Article 31 thereof allows domestic operation only of Bolar provision, the legislature was entitled thereunder to, if of the view that considering the extent of the Indian Generic Industry, export for purposes of Section 107A(a) should be permitted, to do so.

Burden of Proof

On the question of burden of proof qua purpose of alleged export under Section 107A(a), the Court negatived Bayer's contention that the burden of proving that the exports are for the purpose prescribed in Section 107A(a) has to be on the exporter, and rather shifted the same on the patentee/Plaintiff. The Court was also not inclined to consider the quantities of the exported product for determining the question of whether the export is for the purposes of Section 107A(a) or otherwise and rather deemed all exports by a non-patentee to be for the purposes of Section 107A(a)[6].  The Court specifically held:

"59. This Court cannot proceed to interpret the laws of the countries of intended export to determine whether the export intended in a given case is for the purposes prescribed in Section 107A. All exports by a non-patentee of a patented invention are deemed to be for the said purpose and only if proved to be otherwise, can make the exporter liable for consequences thereof in an appropriate legal proceeding... No suit prohibiting export per se of a patented invention can lie."

What distinguishes this decision (2017) from the aforesaid earlier decision (2014) being passed by another judge of the same Court in the same matter is that whereas this decision does not seem to consider quantities of the patented product being exported determinative, the earlier decision did consider the same as a relevant factor for ascertaining the nature of the impugned activity claimed to be exempted under Section 107A(a) of the Act. In fact, the Court in its earlier decision observed that the product (1 kg of API) sought to be exported by Natco was not for commercial purposes as, admittedly, the said quantity would barely be sufficient for making 1000 to 2000 tablets which is approximately a single trial batch as required by the Chinese Regulatory Authorities.

Does Compulsory Licence come in the way of Section 107A?

On the question of whether by virtue of the condition subject to which the compulsory licence was granted to Natco (i.e. for making, using, and selling the drug covered by the patent for the purpose of treating HCC and RCC in humans within the territory of India only), it would not be entitled to exercise the rights under Section 107A(a), even if it were to be held as inclusive of export, the Court held that the grant of compulsory licence would not come in the way of Natco exercising its rights under Section 107A(a) as a non-patentee. The Court reasoned that the purpose of sale under Section 107A(a) is different from said condition and is only for obtaining the regulatory approvals under the laws of India or in a country other than India.

Based on the above findings, the Court finally disposed of the writ petition and the suit "(a) by directing that subject to Natco and Alembic filing affidavit by way of undertaking of their respective Director duly supported by the Resolution of the respective Board of Directors, with advance copy to the counsels for Bayer, to the effect that they, during the life of the respective patent, will not export the respective patented invention for purposes other than those specified in Section 107A they would be entitled to export the patented invention for the purposes of Section 107A of the Act; and (b) with liberty to Bayer to, if makes out a case of the exports effected or to be effected being for purposes other than specified in Section 107A, take appropriate proceedings therefor."

The Way Forward

It is evident that Section 107A(a) is highly relevant in the Indian scenario and accordingly given a wide scope and ambit by the Courts in India. Despite this seemingly broad scope of protection, the exact contours of the exemption still remain not completely clear and any inquiry into its applicability remains highly fact-specific. For instance, Section 107A(a) is silent about certain aspects like timing of use of the patented invention, liability of third party supplier of API to a generic manufacturer, and stockpiling of drugs. The stockpiling of drugs in anticipation of patent expiration was not considered as valid practices under the WTO ruling involving the Canadian Bolar provision that allowed a stockpiling exception six months prior to the expiry of the patent. It is hoped that the jurisprudence on the subject will be revisited and statutory provisions will be interpreted in a manner suited to the true intent behind their promulgation thereby providing more clarity on the issues involved and legal certainty to the overall process, benefitting both patentees and third parties.

[1] Section 107A as proposed under 1999 Bill reads as under:
"107A For the purposes of this Act,-

(a) any act of making or using a patented invention within three years before the expiry of the term of the patent by any person for the purpose of development and submission of the information to any regulatory authority responsible for grant marketing approval for the product of invention;

(b) importation of patented products by any person from a person who is duly authorized by the patentee to sell or distribute the product, shall not be considered as an infringement of patent rights."

[2] Section 107A as brought in force for the first time in 2002, reads as under:
"107A. Certain acts not to be considered as infringement -For the purposes of this Act,-

(a) any act of making, constructing, using or selling a patented invention solely for uses reasonable relating to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use or sale of any product;

(b) importation of patented products by any person from a person who is duly authorized by the patentee to sell or distribute the product, shall not be considered as an infringement of patent rights."

[3] Section 55.2(1) of the Canadian Patent Act reads as under:

"It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product."

[4] WTO dispute "Canada — Patent Protection for Pharmaceutical Products"

[5] It is observed that only word "Section 107A" is used throughout the SJ judgment (2017). It does not specifically refer to Sec. 107 A (a).

[6] It was Bayer's contention that Alembic exported at least 90 Kg. Rivaroxaban worth Rs.3 crores and export of such quantity could not be within the meaning of Section 107A.

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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