by Morag Peberdy and Christina Helden

On 19 March 2013 the India’s Intellectual Property Appellate Board (IPAB) released its written judgment upholding the Controller of the Indian Patent Office’s decision to grant Natco Pharma Ltd a compulsory licence under Bayer A.G.’s patent for its anti-cancer drug Nexavar.  Section 84(1)(a)–(c) of the Indian Patents Act 1970 sets out three conditions for the grant of a compulsory licence.  The IPAB confirmed that although any one of these is sufficient, all three requirements were in fact met in this case, namely Bayer had not: (a) satisfied the reasonable requirements of the public; (b) made the patented invention available at a reasonably affordable price; or (c) worked the patented invention in India.

Although the IPAB was not as rigid in its views on local working as the Controller, this aspect of the judgment is most likely to raise concern internationally, and has implications across all industry sectors.  The Controller took the stance that for a patent to be worked locally, product must be manufactured in India.  The IPAB held that the local working requirement needs to be considered on a case-by-case basis.  However, if product is merely imported, the onus is on the patentee to show why its product could not be manufactured locally.  As Bayer did not manufacture Nexavar in India nor provide evidence as to why it could not manufacture this particular drug in India, it failed the local working requirement.  The IPAB considered WTO’s Trade Related Aspects of Intellectual Property Rights Agreement (TRIPs) but found no inconsistency.  Others are likely to disagree, and to view the IPAB’s interpretation of s84(1)(c) as being protectionist and incompatible with the fundamental principle of non-discrimination that underpins TRIPs. 

Article 31 of TRIPs does allow India and other WTO members some discretion to determine the grounds for granting compulsory licences.  However, Article 27.1 states that “patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.”.  It is hard to reconcile Article 27.1 with the IPAB’s requirement for a patentee to show that product cannot be manufactured locally.

The IPAB also rejected various other arguments which Bayer raised on appeal in relation to the other grounds on which compulsory licences can be granted.  For example, Bayer argued that the sales of an unauthorized generic version of Nexavar provided by Cipla Ltd should be taken into account when determining if Bayer had met the reasonable requirements of the public in working the patented invention.  The IPAB concluded that only sales made by the patentee and/or licensee were relevant.  Bayer also contended that the reasonable affordability of an inventions should involves considering what is reasonable to both the public and the inventor taking the latter’s R & D efforts into consideration.  The IPAB agreed with the Controller that reasonable affordability is seen from the public’s viewpoint, rather than the patentee’s.

Natco may now sell a generic version of Nexavar in India, providing that it pays a royalty on all net sales and provides the drug at no cost to 600 people annually.  Bayer was successful in raising the royalty level on appeal from 6% to 7%.

Photo of Morag Peberdy Morag Peberdy

Morag Peberdy has broad experience in all areas of intellectual property, where she advises on both contentious and non-contentious issues. Her wide-ranging expertise includes patents, trademarks, designs, copyright, database rights and confidential information, and covers drafting intellectual property agreements and infringement and contractual…

Morag Peberdy has broad experience in all areas of intellectual property, where she advises on both contentious and non-contentious issues. Her wide-ranging expertise includes patents, trademarks, designs, copyright, database rights and confidential information, and covers drafting intellectual property agreements and infringement and contractual disputes. Her particular focuses have been on patent work in the life science sector, and in advising branded goods companies.