Delhi High Court
Bayer Corporation vs Union Of India & Ors. on 22 April, 2019
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 12.10.2018
Pronounced on: 22.04.2019
+ LPA No.359/2017, CM Nos.17922/2017, 20160/2017, 33383-
84/2017, 47167/2017 & 660/2018
BAYER CORPORATION ..... Appellant
Through: Mr. Sudhir Chandra, Sr. Adv. with Mr.
Sanjay Kumar, Ms. Arpita Sawhney and Mr. Arun
Kumar Jana, Advs.
versus
UNION OF INDIA & ORS ..... Respondents
Through: Mr. Ripu Daman Bhardwaj, CGSC with
Mr. T.P. Singh and Mr. Shashwat Jain, Advs. for
R-1 & 6.
Ms. Rajeshwari, Adv. for R-2 & 5.
Ms. Saya Choudhary Kapur, Mr. Vivek Ranjan
and Mr. Devanshu Khanna, Advocates for
Interveners.
+ RFA(OS)(COMM) 6/2017, CM Nos.17508/2017 & 32128-
29/2017
BAYER INTELLECTUAL PROPERTY GMBH & ANR
..... Appellants
Through: Mr. Guru Krishna Kumar, Sr. Advocate
with Mr. Pravin Anand, Mr. Nishchal Anand and
Mr. Sanchith Shivakumar, Advs.
versus
ALEMBIC PHARMACEUTICALS LTD. ..... Respondent
Through: Ms. Saya Choudhary Kapur, Mr. Vivek
Ranjan and Mr. Devanshu Khanna, Advs.
FAO (OS) (COMM) 169/2017 Page 1 of 90
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
MR. JUSTICE S. RAVINDRA BHAT
%
1. This judgment will decide two appeals: one from the decision of the
learned single judge in a writ petition, W.P.(C) No.1971/2014 ["the writ
petition"], filed by the appellant [hereafter called "Bayer"] against the
respondent (hereafter "Natco") in LPA No. 359/2017 and the other, in a suit
decided in CS (OS) (Comm) 1592/2016 filed by Bayer against the
respondent in RFA(OS)(Comm) 6/2017 (Alembic Chemicals Ltd, the
defendant in the suit, hereafter called "Alembic"). Both judgments deal with
an identical issue, concerning the correct interpretation of Section 107A of
the Patents Act, 1970 ("the Act") which is commonly known as the ―Bolar
provision‖.
2. Facts in the appeal arising out of the judgment in the writ petition (i.e.
in LPA No359/2107) are that 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 or
any other drug or product thereof which was a subject matter of Bayer‟s
Patent No.215758. When the suit was pending, Natco applied to the Patent
Office for grant of compulsory licence against that patent. This application
was granted, on 09.03.2012, by the Patent Controller, under Section 84 of
the Patents Act 1970 (hereafter "the Act"). The compulsory licence granted
was solely for the purposes of making, using, offering to sell and selling the
drug covered by the patent within the territory of India. However, inter alia,
apart from producing the drug for the Indian market, Natco manufactured the
FAO (OS) (COMM) 169/2017 Page 2 of 90
product covered by the compulsory licence for export outside India. Bayer
filed a writ petition seeking a direction to the Customs Authorities to seize
the consignments for export containing products covered by compulsory
Licence including ‗Sorafenat' ("Natco" drugs hereafter) manufactured by
Natco. Notice of writ petition was issued by a learned single judge of this
court; the customs authorities were directed to ensure that no consignment
from India containing ‗Sorafenat' covered by compulsory licence was
exported. At the same time, Natco was given the liberty to apply to the court
for permission to export the drug. Later, on 23.05.2014, Natco pointed out
that in fact it has already been granted a drug license and it was permitted to
export the drug Sorafenib Tosylate not exceeding 15 gm for development/
clinical studies and trials.
3. Natco next applied for permission to export 1 Kg of Active
Pharmaceutical Ingredient (hereafter "API") Sorafenib to China to conduct
clinical studies and trials for development of drug for regulatory purposes.
That application was rejected by Bayer, which argued in its writ petition, that
if permission were granted to Natco, it would be contrary to Section 107A
and that such a transaction would be a commercial sale and hence, a patent
infringement. According to Bayer, Section 107A was not applicable, because
Natco was not conducting research. The sale of API, therefore, amounted to
infringement of its patent. Bayer‟s interpretation of Section107A was that
the provision mentions the word "sale" and also "import", but the legislature
consciously excluded the term "export". Bayer relied on a German
decision Polpharma as well as the US history of the Bolar Exemption (that
allows sale only within the United States) and canvassed a restricted - as
opposed to a liberal interpretation- of Section107A.
FAO (OS) (COMM) 169/2017 Page 3 of 90
4. Natco‟s counter affidavit in the writ petition among others urged that
it did not export the finished product Sorafenat to any party outside India for
commercial purpose. It further argued that the words „sale‟ for the purpose
of drug development i.e. ―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‖ clearly
pointed to the legislative intention that exports, for the purpose of drug
development, in compliance of regulatory law of a country outside India was
permissible.
5. The suit, CS(COMM) No. 1592/2016 was filed by Bayer to injunct
Alembic from making, selling, distributing, advertising, exporting, offering
for sale and in any manner directly or indirectly dealing in Rivaroxaban and
any product that infringed its (Bayer‟s) patent IN 211300 and for ancillary
reliefs pleading: (i) that the subject patent is registered in the name of Bayer
and is titled ―Oxazolidinones and their Use; ii) that Alembic is
manufacturing and exporting Rivaroxaban to the European Union; and that
Alembic has made multiple Drug Master File submissions to the United
States Food and Drug Administration in the United States of America for the
drug Rivaroxaban; iv) that a drug Master File is a submission to the United
States Food and Drug Administration that is used to provide confidential
detailed information about the facilities, processes and articles used in the
manufacturing, processing, packaging and storing of one or more human
drugs; v) that Alembic has also filed a patent application for grant of a
process patent for Rivaroxaban which specifically referred to Bayer‟s patent
FAO (OS) (COMM) 169/2017 Page 4 of 90
and said that Rivaroxaban is disclosed by Bayer„s patent; thus, clearly
showing that Alembic infringed Bayer‟s patent.
6. During the hearing, Alembic stated that the exports being effected by
it are covered by Section 107A. Thereafter, on 15.12.2016, Alembic
categorically stated that till then it had not commercially launched
Rivaroxaban and had only exported it within the meaning of Section 107A;
further, that in the event Alembic, in the future, intended to launch
Rivaroxaban, it would give one month‟s notice to Bayer to enable the latter
to avail of its remedies. Bayer argued on that date that Alembic exported at
least 90 Kg. Rivaroxaban worth ` 3 crores and export of such quantity could
not be within the meaning of Section 107A.
7. Parties in the Alembic suit were informed during the hearing, on
15.12.2016, that the Natco‟s writ petition had been heard, (involving an
identical issue of law) in which judgment had been reserved; in the
circumstances, since only the legal question of interpretation of Section
107A of the Act was to be decided, there was no need for pleadings; the
court bound Alembic to its statement aforesaid and with the direction that
Alembic thereafter will not effect any export without giving 15 days‟ notice
to Bayer. Arguments in addition to those already addressed in the writ
petition, were permitted. Alembic later applied stating that it was effecting
exports to Brazil and Palestine; that application was adjourned. Arguments
were concluded on 14.02.2017 and judgment reserved.
8. After a detailed analysis of the contentions and the facts, the impugned
judgment rejected Bayer‟s arguments. The court found that firstly, the
quantity sought to be exported by Natco was just enough for 1000-2000
tablets, and, therefore, cannot be termed a commercial activity. The court
FAO (OS) (COMM) 169/2017 Page 5 of 90
then said that the intention of the legislature in interpreting Section 107 must
be gathered from the plain meaning, which clearly does not exclude sale
outside India. Further, there was nothing in Section 107A that implies that
only the manufacturers themselves can avail of the exemption and cannot
sell it to a third party. The only requirement is that the sale must be
"reasonably related to" the submission of information under the law (in this
case, Chinese law). The court also pointed that the WTO Panel had expressly
upheld such a wide interpretation of the similarly-worded Canadian Bolar
Exemption to be TRIPs compliant and, therefore, not unfairly prejudicial to
the patent holder.
9. On the text of Section 107A, the learned single judge noticed the
difference between the wordings of that provision and Section 48, noting that
the terms "constructing" in Section 107A and "offering for sale" in Section
48 were not important. The learned single judge then held that:
―It is thus the purpose for which the said acts are done‗ which
distinguishes, whether the acts constitute infringement of patent
or not. If the said purpose is within the confines of Section
107A, 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, the said acts would
constitute infringement of patent and patentee can prevent non-
patentee from doing them.‖
10. The learned single judge then held:
―27. The point of difference between Bayer and Natco /
Alembic is qua selling outside India. While Bayer contends that
the word ―selling‖ in Section 107A is confined to within the
territory of India and selling of patented invention outside India
FAO (OS) (COMM) 169/2017 Page 6 of 90
even if for purposes specified in Section 107A would constitute
infringement which can be prevented by patentee, the
contention of the senior counsels for Natco / Alembic is that use
of the word ―selling‖ under Section 107A is without any such
restriction of being within India only and would include selling
outside India also, so long as solely for the purposes prescribed
in Section 107A.
28. The counsels for Bayer, to explain why Section 107A
refers to the purpose of development and submission of
information required under law in a country other than India
that regulates manufacture, construction, use and sale of
pharmaceutical products, if selling referred to in Section 107A
was to be within the confines of India contend that the
information generated in India and required under law of a
country other than India to be submitted for obtaining approval
for manufacture and marketing of any pharmaceutical product
in that country can be submitted without the sale of patented
invention outside the country. According to them, 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.
29. According to me, to uphold what Bayer contends, would be
contrary to the natural / literal / textual interpretation of
Section 107A of the Patents Act. To ascribe natural / literal /
textual meaning to the language of Section 107A of the Patents
Act, I proceed to dissect clause (a) thereof as under:
(i) Any act of making, constructing, using, selling or importing
a patented invention
(ii) solely for uses reasonably related to 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
FAO (OS) (COMM) 169/2017 Page 7 of 90
(iii) shall not be considered as infringement of patent rights. It
becomes immediately evident that ‗selling' permitted by Section
107A is of a patented invention‗i.e. a p̳ roduct‗ and not of
‗information'. The word ‗information' is in the context of
‗required to be submitted to any authority under any law of
India or of a country other than India regulating the
manufacture and marketing of any product'. Section 107A, as
per its natural / literal / textual meaning requires selling of a
patented invention solely for submission of information
required under any law for the time being in force in a country
other than India that regulates the manufacture, construction,
use and sale of any product, to be not considered as
infringement of patent right. The counsels for Bayer are unable
to dispute that Section 107A envisages development and
submission of information required under any law of a country
other than India for obtaining approvals for manufacture and
marketing of pharmaceutical products in that country. However
contend that development of the information, required to be
submitted in a country other than India, by making, using and
constructing and selling of patented invention in India only.
Significantly, the counsels for Bayer, qua ‗selling' within India,
admit can be of patented invention i.e. of the product, by Fine
Chemical Producers of India to manufacture or producers of
pharmaceutical products in India and do not insist, should be of
information only. However when it comes to ‗selling' outside
India, they insist cannot be of patented invention or product
and can be of information only. I am unable to read such
dichotomy in the language of Section 107A. It is not found to
distinguish between making, constructing, using, selling for
submission of information required under law in India and
under the law of a country other than India.
31. I am also unable to accept the contention of Bayer that,
use of the word ―selling‖ refers to selling‗ within India' only.
32 ‗Sale', in Black‗s Law Dictionary, 10th Edition, is
defined as transfer of property or title having the elements of i)
parties competent to contract; ii) mutual assent; iii) a thing
FAO (OS) (COMM) 169/2017 Page 8 of 90
capable of being transacted; and, iv) a price in money paid or
promised to be paid. Thus, use of the word ‗sale'/ ‗selling'
entails transfer of property or title in a thing and does not
contain any territorial limitations viz. of being within the
country or State.
XXXXXX XXXXXX XXXXXX
35. The words ‗sale'/ ‗selling' thus, as per their literal / natural
/ textual meaning are without any geographical limitations and
in Section 107A are not to be understood as ‗within India' only
and if such sale / selling were to involve transfer of the patented
invention / product to a country other than India though would
also qualify as export / exporting but would not cease to be sale
/ selling.
XXXXXX XXXXXX XXXXXX
37. As far as Section 107A is concerned, use therein of the
words ―law for the time being ‗in a country other than India' is
evidence of, obtaining regulatory approvals in countries other
than India being contemplated by the legislature. With such
contemplation, the legislature provided that certain acts
mentioned in Section 107A, required to be done for the purpose
of obtaining such approval, would not be considered as
infringement of patent rights. One of such acts is of selling of
patented invention. The plain meaning of Section 107A is that
selling of patented invention for obtaining regulatory approval
in country other than India would entail transfer of patented
invention i.e. product from India to that country. There is
nothing in the language of Section 107A to suggest that only the
information generated / collected in India could be transported
out of India and not the patented invention. 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. There is
nothing in the language of Section 107A to indicate that the
legislature applied itself that the regulatory laws of countries
other than India would accept the information generated and
FAO (OS) (COMM) 169/2017 Page 9 of 90
collected in India. The counsels for Bayer during the hearing
also could not demonstrate that information collected /
generated in India would be acceptable for grant of regulatory
approvals for manufacture and sale of drugs in other countries.
Even otherwise, the interpretation of laws of India cannot be
dependent on foreign laws. I have not found any provision
elsewhere in the Patents Act requiring the word ‗selling' in
Section 107A to be restricted to ‗within India' only.‖
Contentions of parties: Bayer
11. Mr. Sudhir Chandra, Senior Advocate (for Bayer) argues that Section
48 of the Act implicitly defines infringement by listing the exclusive rights
of the patentee. Section 107A of the Act describes a particular set of
circumstances in which acts that are largely those named in Section 48
would "not constitute infringement". Thus, Section 107A of the Act clearly
provides for circumstances/actions which, but for its existence, would be
covered as an infringement under Section 48. Therefore, it is clearly a
proviso/exception. But for Section 48, Section 107 has no purpose.
Therefore, the latter constitutes an exception to Section 48 and does not
confer a right. He relies on the Supreme Court decision in S. Sundaram
Pillai v. V.R. Pattabiraman AIR1985 SC 582 that the nature of a proviso is
such that it:
―it is meant to be an exception to something within the main
enactment or to qualify something enacted therein which but for
the proviso would be within the purview of the enactment.‖
[Emphasis supplied]
12. Furthermore, the nature of Section 107A of the Act as a
proviso/exception can be seen from its placement in the statute by the
legislature. It finds mention in Chapter XVIII which is titled "suits
FAO (OS) (COMM) 169/2017 Page 10 of 90
concerning infringement." This means that Section 107A of the Act is
intended to be used as a defence that may be claimed in the course of a suit
for infringement rather than form the basis for an independent right or
separate actionable claim. Moreover, Section 107A of the Act is placed just
after, and along with, Section 107 which is titled "Defences etc. in suits for
infringement". This gives yet another indication of the legislative intent
behind the manner in which Section 107A of the Act was envisioned to be
applied. The learned single judge‟s finding that the provision is not an
exception and that it confers an independent right, is impugned as erroneous.
It is also stated that the observations in the impugned judgment that the
interpretation furthers the right of the exporter, under Article 19(1)(g) of the
Constitution of India does violence to the plain reading of Section 107A
which neither uses such language nor envisages the commission of such acts
beyond the exhaustively defined situation that it lays out. It is also argued
that the existence of a right implies the creation of an actionable claim. The
absence of a legislative prescription of a remedy clearly shows that it is not
the legislative intent to confer an independent right to a party under section
107A of the Act.
13. Learned Senior Counsel relied on the rule that a proviso should be
interpreted narrowly, unlike a right which warrants liberal interpretation.
Specifically, a proviso must be interpreted keeping in mind the scope of the
main enactment to which it forms a proviso. This was recognised by the
Supreme Court in The Commissioner of Income Tax v the Indo-Mercentile
Bank Ltd. [AIR 1959 SC 713].
14. Mr. Chandra argued that the legislative intent behind Section 107A
of the Act is only to ensure the availability of a competitor's product
FAO (OS) (COMM) 169/2017 Page 11 of 90
immediately after the expiry of patent in the Indian market without having to
wait for regulatory approval post patent expiry. However, this intent does
not extend to ensuring the availability of the same in other countries. He
relies on the Notes on Clauses of the Patents (Amendment) Act 2002 as well
as the Joint Parliamentary Committee Report pertaining to the insertion of
Section 107A of the Act. Learned Senior Counsel stated that the phrase "in a
country other than India‖ refers to the submission of information in
countries other than India so that the data generated in India may be
submitted around the world, as is an accepted practice in the pharmaceutical
industry. In fact, India is becoming a favoured global destination for
conducting clinical trials and the data generated in this process is often used
before regulatory regimes around the world. The expression in Section 107A
(i.e. sale, construct etc.) is qualified by the word "law" with the phrase "in a
place other than India'. The latter phrase has clearly not been used to
describe the acts of "making, selling using", etc., i.e. it cannot possibly
intend to authorise the commission of acts outside the territory of India. The
phrase has merely been included so that companies in India may avail the
Bolar exemption not only to obtain approvals in India but around the world,
without having to conduct separate clinical trials for every instance of
submission of data. It is argued that Section 107 has three important
elements, i.e. the activities (selling, making, constructing) the purpose,
which can only be "development and submission of information"; and the
law i.e. that such development (and submission of information) should be
"required by any law in India or in a country other than India". Learned
Senior Counsel argued therefore, that the phrase in "a country other than
India" refers to the law that requires development and submission of
FAO (OS) (COMM) 169/2017 Page 12 of 90
information and the law that ―regulates the manufacture, construction, use,
sale or import of any product‖. The policy of the provision is, therefore, met
if activities are permitted in India for the purpose of generating data which
may then be submitted before the regulatory authority in India or a country
other than India. It is argued that this construction only would be consistent
with the legal requirement of not placing any fetters on the patentee's
exclusive rights beyond the fulfillment of the legislative purpose or intent.
15. Mr. Chandra highlighted that the expression "exports" occurs in
various other provisions of the Act: reference is made to Sections 84, 90(1)
and 92A in this regard. They prescribe restrictions and export of a patented
product may be allowed only within the ambit of such restrictions. All these
show that the legislature has consciously used the expression "export"
whenever it was necessary. However, no such explicit mention of export or
corresponding restriction as found in these provisions can be seen in Section
107A of the Act. It is urged that this is significant, given the background of
the fact that the term "importing" was specifically included in Section 107A
of the Act by the Patents (Amendment) Act, 2005, without any mention of
the word export" or "offering for sale". This clearly indicates that the
legislature did not intend to include these activities within the ambit of the
said Section. The inclusion of "importing" in Section 107A of the Act also
reinforces the legislative intent which is to ensure the availability of the drug
in the Indian market. Learned Senior Counsel also relied on the Joint
Parliamentary Report which clearly states that the purpose of Section 107A
of the Act is to bring India's Bolar exemption in line with the global
requirements.
FAO (OS) (COMM) 169/2017 Page 13 of 90
16. It is next submitted that the word "selling" does not include exports,
because firstly the Act is territorial in nature and explicitly states in Section
1 that it "extends to the whole of India". Clearly, the Act only seeks to
regulate activities which take place in India and hence, does not deal
with/permit sale outside India. Moreover, as was held in the judgment of the
Supreme Court in GvkInds Ltd. & Anr. v The Income Tax Officer &
Anr.(2011) 4 SCC 36 only those extra-territorial aspects which have an
impact or nexus with India and are enacted with the intent of creating some
benefit for India would fall within the constitutionally sanctioned idea of
legislative competence. Next, the nature and purpose of the Act is primarily
to safeguard the interests of the patentee and the nature and purpose of
Section 107A of the Act is an exception to the patentee's rights so that the
generic versions of the drug may be made available immediately upon
expiry of the patent in the Indian market. Inclusion of "export" within this
provision would not serve the Indian market as envisioned by the Legislature
and therefore, the same would be impermissible as per the law on extra-
territorial legislative action. Thus, making, constructing and using of the
product are permitted in India alone and export for that purpose is not
contemplated.
17. Moreover, since the act of selling in Section 48 refers to sale "in
India" only (as can be seen from the provision), it cannot be said that Section
107A of the Act, can enlarge the scope of this term and grant an additional
right to the defendant. Counsel derives support from the judgment in Indo-
Mercantile Bank Ltd (supra). It is argued, moreover, as untenable that the
legislature would use the word "selling "in one sense as part of Section 48
FAO (OS) (COMM) 169/2017 Page 14 of 90
but accord to it a different meaning in an exception to the same Section
within the same Act i.e. Section 107A of the Act.
18. It is argued that the expression "exports" has a clear meaning in the
general sense, and statutorily. "Export" as defined in Black's Law Dictionary
means:"To send or carry abroad, to send, take or carry (a good or
commodity) out of the country; to transport (merchandise) from one country
to another in the course of trade; to carry out or convey goods by sea".
Thus, the act of sale which may occur in the course of an export can be
concluded upon transfer of title in the goods which may happen outside
India, however, the word "selling" referred to in both Section 48 and Section
107A of the Act is clearly territorial in nature whereas the term "export" is,
by definition, extra-territorial in nature. Thus, the learned Single Judge has
grievously erred in conflating the two terms.
19. It is argued that "sale" by "export" is mentioned in the Central Sales
Tax Act, 1956 ("CST Act") which deals with a ―sale said to take place in
the course of export". While considering the import of this phrase in Article
286, the Supreme Court held in The Stale of Travancore-Cochin and Ors. v.
The Bombay Company Ltd. AIR 1952 SC 366and The State of Travancore-
Cochin v. The Shanmugha Vilas Cashew Nut Factory & Ors AIR 1953 SC
333that two types of sales or purchases would fall within this category: (a) a
sale or purchase which itself occasions the export and (b) a sale or purchase
affected by a transfer of documents of title to the goods after the goods are
put in the export stream (i.e. after they have crossed the customs frontiers of
India). Such an interpretation suggests that "sale" per se does not
comprehend in itself export, which is a distinct activity, and that sale which
occurs in the course of exports is extra-territorial in nature.
FAO (OS) (COMM) 169/2017 Page 15 of 90
20. It is argued that the impugned judgment erroneously found that a
plain reading of section 107A of the Act would include the word "exports"
as the same would fall within the meaning of the word "selling". The
construction placed by the learned Single Judge to the provision really
amounts to supplying casus omissus. This is contrary to the settled principles
of statutory interpretation.
21. It is argued that the Section must be read in accord with global
standards applicable to the Bolar Exemption. Reference is made to the Joint
Parliamentary Committee Report which clarifies that Section 107A of the
Act was meant to be in line with the global standards in respect of the Bolar
exemption. Furthermore, allowing export under Section 107A of the Act
would be in violation of Article 30 of the TRIPS (Annexure14) which allows
for exceptions to patent rights so long as the exception is (a) limited ; (b)
does not unreasonably conflict with the normal exploitation of the patent ;
and (c) does not unreasonably prejudice the legitimate interests of the
patentee. It is pertinent to note that these were the very issues that were
considered in the case of Canada-Patent Protection of Pharmaceutical
Products [DS 114, hereafter "Canada Dispute" or "Canada Patent Dispute]
decided by the WTO Dispute Settlement Panel ("DSP" hereafter) when
adjudicated the legality of Canada's Bolar provision. Notably, both sides
in this dispute readily acknowledged that such a provision was in the nature
of an exception to the patentee's rights. While the WTO upheld the validity
of the Bolar exemption, it did not consider whether an export would be
permissible within the ambit of this exception. In fact, Canada's contentions
with respect to the issue of submission of information before foreign
regulatory regimes clearly indicates that the Canadian provision envisioned
FAO (OS) (COMM) 169/2017 Page 16 of 90
the testing itself to be carried out domestically while the information
generated therefrom could be used for submission abroad. This case
therefore, underscores the approach which the appellant is canvassing for the
consideration. Furthermore, allowing exports under Section 107A of the Act
would also be in disregard of Article 31 of the TRIPS which states in clause
(f) that the any use of a non-patentee should be predominantly for the supply
of the domestic market of the member country authorizing such use.
22. Bayer argues that reading exports into Section 107A of the Act
would be contrary to the general interpretation of "Bolar Provisions" around
the world. Those countries which do permit export explicitly provide for the
same in their statute and do so with a specific purpose. For instance,
Australia permits exports explicitly for patents which have received an
extension in their term. Several jurisdictions have also recognised the blatant
prejudice this would cause to the rights of the patentee such as the Polish
Supreme Court in A.P. Inc. v. SFP SA [IV CSK 92/13] and the German
Appellate Court in Astellas v. Polpharma [12-U 68/12]. Therefore, the
learned Single Judge returned findings which are not in line with the
legislative intent and also in the teeth of the global standards with respect to
the Bolar exemption.
23. It is submitted that arguendo if Section 107A of the Act permits
exports, the burden of proof must fall on the non-patentee. In this regard, it
is stated that it is an established position under the law of evidence that the
burden of proof must lie on the party who relies on a fact. This can be seen
from Section 106 of the Indian Evidence Act, 1872 [Annexure 19], which
provides that any fact(s) must be proved by the party which seeks to rely on
the same. This also follows naturally from the fact that Section 107 of the
FAO (OS) (COMM) 169/2017 Page 17 of 90
Act is a defence/exception, as shown above. The burden of proof must
clearly lie on the party who relies on the exception to justify their acts.
Consequently, the non-patentee who relies on the fact that their export is for
the purposes allowed by Section 107A of the Act must be the one who is
required to prove the same, because it is the exporter/non-patentee who is
privy to all the details relevant to proving the applicability of Section 107A
of the Act such as manner of export, quantities, identity of the importing
party etc. Learned Senior Counsel faults the impugned judgment which held
that
―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 of
the Act. 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.‖
24. It was submitted that this approach effectively shifts the burden of
proof on the patentee to show that the non-patentee's acts are not covered by
Section 107A of the Act. This, in substance and effect, results in placing a
reverse burden which is legally impermissible. Further, this results in the
plaintiff not only having to establish that the defendants' acts overlap with
the exclusive rights of the patentee but that Section 107A of the Act is
inapplicable. Moreover, a consistent application of this approach would also
mean that the burden of proof stands reversed in respect of all activities
contemplated by Section 107A. By extension, it could also be argued that
the plaintiff must prove non-applicability of every section which sets out
situations of non-infringement such as Section 47, 49, etc.
FAO (OS) (COMM) 169/2017 Page 18 of 90
25. It is argued further that even if Section 107A is interpreted to permit
exports, the safeguards implicit in Section 107A of the Act cannot be
ignored. Here Bayer urges that the phrase "reasonably related..." in Section
107A of the Act clearly implies that compliance with the foreign regulatory
regime must be proven and adjudicated upon by the court. It is clear that the
court, in order to ensure the non-patentee's compliance with this phrase,
would be required to undertake an analysis of the foreign regulatory
requirements which the non-patentee uses as a justification for their acts.
Counsel stated that this position is augmented by the prior judicial
interpretations of Section 107A of the Act such as in Teva API India Pvt.
Ltd, v Merck Sharp & Dohme Corp. [FAO (OS) (COMM) 34/2 016 before
DHC (DB)] where the defendants' undertaking in respect of compliance with
the foreign regulatory regime as well as the export quantities were taken into
consideration. It was submitted that the learned Single Judge, by finding that
the court cannot get into an analysis of foreign regulatory regimes, has
rendered the phrase ―reasonably related to the development and submission
of information‖ otiose. Furthermore, the various safeguards which were
pointed out by Bayer before the learned single judge were not taken into
consideration and in fact, it has been held by the latter in paragraph 56 of the
impugned judgment that:
".... Even if it were to be believed that the patented invention
once exported from this Country for the purposes prescribed in
Section 107A of the Act may be used for other purposes, it is for
the patentee to enforce its rights if any in that country. The laws
of this country are only concerned with the sale by way of
export from this country being for the purposes prescribed,"
FAO (OS) (COMM) 169/2017 Page 19 of 90
26. Bayer stated that this completely prejudices the interests of the
patentee, which cannot be in congruence with the object of the Act. The
patentee's interests are prejudiced because:
(i) The patentee may not have a patent in the country of export which would
leave the patentee completely remedy-less.
(ii) Even if the activities undertaken in the destination country post-export
may not be actionable in India, the original act of intention to export or offer
for sale itself certainly falls within the judicial scrutiny of the courts in India.
By deigning to scrutinise and thus permitting, an unqualified entitlement to
export, the potential for future abuse increases manifold. This would surely
prejudice the rights of the patentee.
(iii)The patentee will have to undertake a global surveillance, tracking the
products exported to establish what purpose they are being used for and then
enforce their patents (if any) in multiple countries. This will give the
defendants a free reign to export patented products without fear of
prosecution. This could not have been the purport and intent of Section
107A of the Act.
27. It is argued lastly that in any event, the learned single judge failed to
even consider the quantities sought to be exported by the respondent. They
have to be compared with the quantities that are required by the regulatory
regime to which information is to be submitted. This is crucial in confirming
the purpose for which the non-patentee is undertaking the export. For
instance, in the present case, more than 90 kgs of the patented product has
been exported by the respondent. Non-consideration of the same runs
contrary to the requirements of Section 107A of the Act as held in the
pronouncement of Teva (supra).
FAO (OS) (COMM) 169/2017 Page 20 of 90
Contentions of Natco
28. The learned senior counsel, Mr. Anand Grover submitted that Natco
disputed Bayer‟s factual assertion and contends that it had nothing to do
with the alleged exports of the formulations. It is urged that anybody can
buy the formulated drug in the market and send it out of the country. It is
submitted that Bayer proposes selling the API (bulk drug) of Sorafenib
Tosylate to M/s Hisun Pharmaceutical Co. Ltd ("Hisun" hereafter) in China,
solely for generating data in China through Hisun to submit it to Chinese
drug regulatory authorities. In any event, the issue of export under Section
107A applies both to API and formulations. Pertinently, on 13.05.2011, i.e.
before the issuance of the compulsory license, the Drugs Control
Administration of Govt. of Andhra Pradesh granted a license to Natco to
manufacture Sorafenib Tosylate API for domestic and export purposes. This
raw material/bulk form is not covered by the compulsory license issued to
Bayer. It is urged that Chinese law does not permit any non-Chinese entity to
submit regulatory dossiers based on data and information generated in a
country other than China. Similar laws exist in other countries. The studies
are required to be conducted in China by a Chinese entity to the satisfaction
of Chinese regulatory authorities. Reference is made to the SFDA Order No.
28-Provisions for Drug Registration-Article 10-Provisions of Drug
Registration.
29. Mr. Grover submits that Bayer‟s patent expires on 12.01.2020;
Article 19 of the Chinese drug registration law enables an entity other than
the patentee to apply for patent registration two years prior to the expiry of
its term. Natco denies Bayer‟s allegation that, under the guise of the grant of
compulsory license, it is exporting the formulation to diverse countries, as
FAO (OS) (COMM) 169/2017 Page 21 of 90
baseless. It is argued that Bayer concedes that a generic manufacturer in
India can carry on activities of making, constructing, using, selling or
importing the patented invention for the development and generation of data
to Indian authorities or foreign authorities, but however, contends that the
patented article cannot be exported for development and generation of data
abroad for submission to the foreign regulatory authorities. Natco submits
that i) The TRIPS Agreement took note of the global nature of the
pharmaceutical industry, the global need of access to affordable medicines.
(ii) TRIPS also took note of extant practice under the US Bolar provision of
exporting a patented article abroad for, developing and generating data
abroad for submission to the US regulatory authorities, as exemplified by the
US Supreme Court in Intermedics Inc. v Ventrilex, 775 F. Supp. 1269 (N. D.
Cal. 1991). Mr Grover argued that Section 107A is enacted pursuant to
Article 30 of the TRIPS Agreement (Providing for limited exceptions to
exclusive rights conferred by the grant of a patent) and after the decision of
the WTO Dispute Panel decision in Canada-Patent Protection of
Pharmaceutical Products dispute (WTO/DS114/R) (hereinafter, the "Canada
Dispute"). It is submitted, furthermore, that Section 107A takes into account
the unique position of the Indian generic pharmaceutical industry in the
international market and its role as the key supplier of affordable generic
medicines. Therefore, Section 107A goes beyond the Canadian provision in
this behalf.
30. Natco urges that rights under Section 48 are subject to the acts
exempted under Section 107A. Section 107A read with Section 48 do not
prohibit export if the person concerned otherwise satisfies the conditions of
Section 107A. Natco argues that sale under Section 107A includes export
FAO (OS) (COMM) 169/2017 Page 22 of 90
out of India. It therefore says that export of API for purposes ―reasonably
related to development and submission of information‖ to Chinese
authorities is legitimate. It is furthermore argued that the rights under
Section 107A and under Section 84 are independent but can be exercised by
the same person.
31. Explaining the drug innovation and patent life cycle, when a product
with beneficial effect is developed, its patent is sought by the inventor. But,
a pharmaceutical drug can be introduced in the market only after conducting
animal toxicity studies which are Phase I, II, and III human clinical trials
generating information and data which is submitted to the satisfaction of
drug regulatory authorities. To avoid repeated clinical trials on patients,
regulatory authorities over world permit generic companies to carry on
studies such as bioequivalence, bioavailability and stability studies to
establishing chemical and functional equivalence of their product with the
originator product. This is done on a partial scale commercial production
run. Based on such studies, a drug has to satisfy requirements of
bioequivalence, bioavailability and stability studies. The precise needs, in
terms of quantity of production, is specified by regulatory authorities in
various countries; they differ from each other.
32. Mr. Grover emphasizes that patent regimes do not countenance
continuation of monopoly even a single day more than the permitted patent
term. Thus, generic companies need to only conduct development studies,
generation of information and data before the expiry of the patent, i.e. during
a patent‟s term, to launch the product in the market immediately on expiry or
invalidation of the patent. It is submitted that the global nature of the
pharmaceutical industry is so structured that such generic producers are in a
FAO (OS) (COMM) 169/2017 Page 23 of 90
few countries; in some countries there are no generic producers at all. At
times, even developed countries procure fine chemicals from other countries.
Countries without generic industries do not necessarily have domestic
markets that support operation of the industry on an economic scale. In such
situations, the economies of scale for the generic manufacturers would be
achieved if the product is also exported. Learned Senior Counsel also
highlighted the leadership role played by Indian generic pharmaceutical
entities in the global pharmaceutical market and flagged the support given to
developing nations in Africa, South America, Central Asia and Eastern
Europe stating that they supply over 90% of Anti Retro Viral Drugs to the
developing countries. He also quoted a leading author, Brenda Waning,
(Journal of AIDS Studies, 2010, 1335, A lifeline of treatment: the role of
Indian generic maufacturers in supplying Antiretroviral medicines)
33. It was contended that the TRIPS Agreement carves out an exception
under Article 30, permitting regulatory exception activities prior to the
expiry of patent. In this regard, it is stated that several countries including
India, Canada and the US have fashioned their patent laws to carve out such
exception. It is submitted that the Canadian provision, Section 55. 2(1),
enabling use of a patented product for generation of data and information to
be submitted to regulatory authorities, was the subject matter of a complaint
lodged by the US and Europe at the Dispute Settlement Body (hereafter
"DP") of the WTO (in the Canada Dispute). It was contended that Section
55.2(1) violated TRIPS. The other challenge was to Section 55.2(2), the
stock-piling exception of the Canadian law. Mr Grover submitted that the
TRIPS dispute panel in the Canada dispute upheld the Canadian provisions.
He contrasted the language of Section 55.2(1) of the Canada Patent law with
FAO (OS) (COMM) 169/2017 Page 24 of 90
Section 107A of the Act, highlighting that the former only contemplates
"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'. However, Section
107A of the Act of India, contemplates ―... Development and submission of
information required under any law for the time being in force... In a
country other than India, that regulates the manufacture, construction, use,
sale or import of any product.‖It is submitted that hence, Section 107A
recognizes that export (of a patented product) to another country for
development and submission of information (in that country), is not
infringement. In the Canada Dispute, the DSP recognized that the general
language of Article 30 was agreed to by the US on the understanding that it
would help the US secure the Bolar exemption which was already in place
there. The DSP also noted that foreign pre-expiry testing is accepted by the
FDA and noted by the US Supreme Court in Intermedix Inc. (Supra). The
DP found that such a provision was a "limited exception" within the
meaning of Article 30 of TRIPS (Ref. Paras 7.2 to 7.6 DP order). Therefore,
the key is not the quantity but the purpose for which production is carried.
The DP also noted that the Canadian provision was a "limited exception",
irrespective of the quantity involved, because of the narrow scope of its
curtailment of Article 28.1 choices (under TRIPS).So long as the exception
is confined to conduct necessary to comply with the requirements of the
regulatory approval process, the extent of the acts unauthorized by the right
holder that are permitted by it are small and narrowly bounded. Though
regulatory approval processes may require substantial amounts of test
production to demonstrate reliable manufacturing, the patentee's rights are
FAO (OS) (COMM) 169/2017 Page 25 of 90
unimpaired, by the size of such production runs, so long as they are solely
for regulatory purposes and no commercial use is made. (Ref para 7.45 at of
the Canada Dispute). Hence, the DSP clarified that there would be no
infringement of Patent, regardless of the amount so used or exported,
provided the use or export is solely for regulatory purposes and not
commercial use of final product.
34. Mr. Grover next dwelt on the legislative history of Section 107A,
stating that it was introduced after the DSP decision in Canada Dispute. In
1999, the Patents Act (Second Amendment) Bill, 1999 ("1999 Bill") was
introduced in the Rajya Sabha to meet India's obligations under the TRIPS
Agreement (required to be met by 01.01.2000). The Bill proposed the
introduction of a new section i.e. Section 107A. Section 107A was sought to
be amended in 2002 and 2003; but was finally amended in 2005, taking into
account the decision in the Canada Dispute. However, it went beyond that
decision. The changes brought about by the 2005 amendment are: a)
abolition of the three year period prior to patent expiry; b) addition that the
act of selling had to be "solely related to the development and submission of
data‖ in law; and c) addition that the law referred in the section could be of
India "or any country other than India‖; d) going beyond the Canadian law
in that the expression "importing" and "import" were added in Section
107A. Learned Senior Counsel also referred to the Joint Committee on
Patents‟ note of December, 2001, and said that it clarifies that the object of
Section 107A is ensuring that regulatory approvals are not limited to only 3
years before the patent term expiry and allow prompt availability.
35. It is urged that Section 107A and Section 84 operate in different
fields; the former operates on the submission of data generated in
FAO (OS) (COMM) 169/2017 Page 26 of 90
development of the drug to Regulatory authorities for marketing approval,
that is the patented product is not sold in the market, Section 84 operates on
marketing of the patented product for commercial purposes. Referring to
Intermedics, counsel urged that the Federal Circuit court considered the
scope of the Bolar provision. The case involved the sale of stents to a party
outside the US for development purposes and held that sales to foreign
distributors for development studies reasonably related to developing
information could be submitted to the FDA and that such development of
information need not be restricted to the period just before patent expiry.
Thus, export of the patented article to another country was very much part of
the patent law in the US at the time of coming into force of the TRIPS
Agreement. Likewise, this position was noted in Canada Dispute case,
which ruled on Section 55.2 of the Canadian Act. (Ref para 4.38(a) of the
decision).
36. Learned Senior Counsel urged that Section 107A should be
interpreted in accordance with TRIPS and the interpretation placed on that
by the DSP. Furthermore, considering that the Indian law, uses the phrase
"in a country other than India," which is absent in the US law, a fortiori
India permits export to other countries in accordance with their law for
submission of data of development studies. As a result, Section 48 does not
prohibit, but allows export. Indian law would apply to the territory to which
the medicines are imported by the expression "importing" which needs to be
in every patent law by virtue of the minimum standards of TRIPS compliant
intellectual property regime. Therefore, the expression "import" for another
country, in so far as Section 107A is concerned, would mean an export from
India. Therefore, export is actually contemplated under Section 107A.
FAO (OS) (COMM) 169/2017 Page 27 of 90
37. Mr. Grover states that it is an established position in law that any
term in a provision should be given plain meaning. Bayer‟s reading into
Section 107A, limitations is therefore impermissible. Non-existent
limitations in a statute cannot be read into it. Reference is made to GP
Singh‟s Principles of Statutory Interpretation 12th Edition and State of
Orissa v Joginder Pattjoshi (2004) 9 SCC 278. Also, "sale" is a
compendious term that includes "export"; in any event, importantly, patent
law is territorial in nature and does not control any high seas transaction.
Export is actually embraced in and controlled through a sale. The learned
single judge too noted that "sale" is not to be understood as being within
India.
38. It is contended that entities such as Bayer are not prejudiced because
if a drug is imported into a territory in which in respect of that drug, a patent
is granted, then the patentee would be able to interdict any unauthorized use
of the patented article, barring the import for regulatory exception. This is
the accepted position in TRIPS. (Ref para 7.46 Canada Dispute). It is stated
that the Parliament was conscious of the role the Indian generic companies
play in access to affordable medicines around the world and in particular in
developing countries. Mr. Grover urges that Bayer incorrectly claims that
the learned single judge did not appreciate the difference between API and
the finished product. It is stated that after differentiating between API and
the finished formulation, the learned single judge detailed the difference
between Fine Chemical Producers and other manufacturers/producers of
medicines, and concluded that the term "selling" used in Section 107A is to
facilitate selling of API/formulations to the manufacturers of medicines.
Further, the learned single judge noted that even after the 2002 Amendment,
FAO (OS) (COMM) 169/2017 Page 28 of 90
Section 107A was not added as a proviso to Section 48, rather it was
included under the Chapter titled "suits concerning infringement of patents"
under Section 107 titled "Defences, etc., in suits for infringement". He
concluded correctly that Section 48 does not confer a right to prevent
making and selling patented product for purposes solely prescribed in
Section 107A.
39. It is urged that Section 48 of the Patents Act is subject to the
provisions of Section 84 and 107A of the Patents Act. Section 107A is not
subject to the operation of Section 84 or of Chapter XVI of the Act. Thus,
Section 84 does not control Section 107A. Section 48 would yield to other
provisions of the Patents Act, including Section 107A and, its operation
cannot be curtailed by Section 84. In this regard, it is submitted that the
effect to both the provisions, Section 107A and 84, has to be given in
appropriate circumstances. Both operate in different fields. Section 107A
operates on the submission of data generated in the development of the drug
to regulatory authorities for marketing approval, that is the patented product
is not sold in the market, whereas Section 84 operates on marketing of the
patented product for commercial purposes. Stressing on the need to
harmoniously interpret all parts of the statute, it is stated that such consistent
reading excludes the idea that one provision can trump the other and render
it otiose, unless specifically provided. Counsel referred to Padma Ben
Banushali & Another v Yogendra Rathore and Others, (2006) 12 SCC 138.
Reference is also made to High Court of Gujarat v Gujarat Kishan Mazdoor
Panchayat (2003) 4 SCC 712. It is urged that the argument with respect to
the relationship between Section 107A and Section 84 is flawed. The learned
single judge noted that the purpose of Section 107A is different from Section
FAO (OS) (COMM) 169/2017 Page 29 of 90
84, which is only for obtaining the regulatory approvals under the laws of
India or in a country other than India.
40. Without prejudice, it is submitted that the compulsory license under
Section 84 operates as a deed or contract between the Controller and Natco,
the grantee of compulsory licence (Section 93). Such a deed being a
contract, cannot override a provision of law. Hence, the condition imposed
by learned Controller must be read down to give way to Section 107A.
Learned Senior Counsel also highlighted that pursuant to the impugned
judgment, Natco filed an affidavit that during the life of the patent, it would
not export the patented product for purposes other than spelt out by Section
107A. It is urged that the undertaking allows Bayer to revoke an order in
case of breach of undertaking by Natco. This is apart from the remedy that
Bayer has in the form of an infringement suit in the country, where the
patented article is sent to for the purposes of development studies,
generating data on a semi production run for submission to the regulatory
authorities.
41. On behalf of Alembic, Ms. Saya Chaudhary highlighted that Bayer
filed the suit despite knowledge and admission that the defendant (i.e
Alembic) had not launched any commercial product in the Indian market,
and in the absence of any pleadings indicating that the patent was
commercially exploited by Alembic, or any party procuring Rivaroxaban
through Alembic outside India. A suit for infringement was filed solely on
the basis that:(i) a process patent application being PCT/1B2013/055062
pertaining to process of manufacturing Rivaroxaban was filed by Alembic,
which according to Bayer, indicated its (Alembic's) intent to launch a
commercial product in India (ii) a Drug Master File (DMF) was applied by
FAO (OS) (COMM) 169/2017 Page 30 of 90
Alembic, before the US Food and Drug Administration (FDA); (iii) a no-
Objection Certificate was obtained by Alembic for exporting Rivaroxaban to
Europe. Bayer, however could not prove or establish even prima facie that
the acts complained of, fell within the purview of section 48 of the Act, i.e.
commercial exploitation of the patented product as opposed to regulatory
use. Initially, in the suit, Alembic made a categorical statement that it had
neither launched nor commercialized the suit patent in India and that all acts
conducted by it pertaining to Rivaroxaban were solely for regulatory
purposes in India, and abroad as enumerated under section 107A of the Act.
As a result, Alembic committed no act contemplated under section 48. No
allegation of diversion of exports too was alleged in the pleadings or
documents. Accordingly, the first question arising for consideration is
whether based on acts covered under Section 107A, can a party be regarded
as an infringer, who is then required to plead Section 107A as a defense to
Section 48 of the Act.
42. It is urged that the placement of Section 107A in the Act, as a
separate and distinct section, different from Section 107 which deals with
defences, etc., in suits for infringement is evidence of the intent of the
Legislature that Section 107A ought not to be treated as a defence to Section
48, but is required to be treated as an independent section which specifically
provides for certain acts not to be considered as infringement.
43. Ms. Chaudhary said that the shift in Indian Patent law is evident
upon a plain reading of Sections 107A and Section 48 of the Act, both of
which were inserted/substituted simultaneously by Act 38 of the 2002 so as
to make India TRIPS compliant. Section 48 of the Act, in comparison to
other legislative provisions pertaining to protection of IP Rights in India
FAO (OS) (COMM) 169/2017 Page 31 of 90
such as trade mark, copyright etc., is peculiar in nature inasmuch as it is a
negative right, whereby a patentee is legally entitled under the Act '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'. This aspect coupled with the fact that the said provision by clear
and express language has been made 'subject to the other provisions
contained in this Act and the conditions specified in Section
47......'establishes that it is the rights of a patentee enumerated under Section
48 which yield to the rights of third parties under Section 107A of the Act.
Thus, no fetters or restrictions can be placed on the acts enumerated under
section 107A, especially by making parties liable to infringement action. In
other words, patentee cannot prevent third parties from dealing with patented
invention for regulatory use and no infringement action can be
maintainedagainst such regulatory use. This legislative intent is evident upon
a bare perusal of Section 107 of the Act, to which no amendments were
made in 2002, or thereafter so as to label the rights of third parties to use
patented inventions for acts detailed in Section 107A as a 'defence to a suit
for patent infringement'. In fact, in Section 107(2), acts detailed in Section
47 are specifically regarded as a ground for defence as opposed to Section
107A. This intent, not to make Section 107A subservient to Section 48,
cannot be overlooked and nullified by a patentee to label it as nothing but a
defense and a "proviso" to Section 48.
44. It was urged that a known principle of law is that any party who
asserts a specific claim is required under law to establish/prove it. Even
under Section 107A of the Act, save cases which deal with process patents,
the onus to establish infringement, both at the prima facie stage and at the
FAO (OS) (COMM) 169/2017 Page 32 of 90
final stage, with clear and cogent evidence is on a patentee, and not on the
defendant or for that matter a duty of the court, especially as patents rights
are private rights. This is reaffirmed upon perusal of Section 106 of Act,
which deals with power of courts to grant relief in cases of groundless
threats of infringement proceedings wherein again it is for the patentee to
prove that „.....the acts in respect of which the proceedings were threatened
constitute or, if done, would constitute, an infringement of a patent.' If,
therefore, a third party claims that on the basis of its regulatory use, a
patentee is groundlessly threatening to sue such party, then, the patentee has
establish that the acts of the third party constitute commercial exploitation
and is outside the purview of section 107A i.e. regulatory use. If, and only if
a patentee can succeed in proving that a complained act results in
commercial use or exploitation, can a regulatory use defence fail. The mere
fact that a pharmaceutical product/drug is developed into a finished
formulation form and is sold in India or abroad for the purpose of procuring
regulatory approval is however, insufficient to establish infringement; a
plaintiff patentee has to establish how the act complained of falls within the
purview of Section 48 due to which a suit for infringement is maintainable.
This is especially important because Section 107A permits third parties to
carry out trade by way of ―any act of making, constructing, using, selling or
importing a patented invention‖ thereby allowing such parties to profit with
the only limitation being that such trade is be 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, sole or import of
any product.
FAO (OS) (COMM) 169/2017 Page 33 of 90
45. Ms. Chaudhary supported and reiterated the submissions made by
Mr. Grover that interpretation of Section 107A cannot be cut down by
Section 48. It was submitted that to establish infringement, the threshold is
nothing short of proving that the use is commercial. Furthermore, it was
argued that exports are not per se infringement and submitted that a bare
perusal of Section 107A reveals that its application and operation travels
beyond India especially in view of the fact that it seeks to allow certain acts
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...‖. The plain words of the statute itself
provides for acts to be conducted outside India. It is a well settled principle
of law that words of a statute must be given their plain literal meaning.
Bayer‟s interpretation, however, would result in a dichotomy whereby the
term 'selling' would be interpreted as the selling of the 'product' itself in
India, but for the purposes of seeking regulatory approvals outside India, it
would be interpreted as selling of 'information'. Such dichotomy was never
the intention of the legislature, as is evident from a plain literal interpretation
of Section 107A, and it is not open to Bayer to bring in such a dichotomy by
way of judicial interpretation. It was urged that therefore, no territorial
restriction ought to be imposed upon the term "sale" contained in Section
107A as it is being sought to be done by Bayer by way of judicial
interpretation, which in effect amounts to seeking legislative enactment.
46. It was argued that if one applies a purposive interpretation to the
present case, the fact that other nations/countries have expressly or
specifically provided for a bar to export for seeking regulatory approvals in
other countries as is the case in the USA and Australia, supports Alembic's
FAO (OS) (COMM) 169/2017 Page 34 of 90
contention that it was never the intention of the Act to prevent export of
patented invention for regulatory purposes under section 107A of the Act.
Further, even though the application of the Bolar Provision in the USA
under Section 35 U. S. C. § 271 (e) (1) is limited only to the US, yet, in
Intermedics Inc (supra), export of patented product was allowed and held to
be non-infringing in nature as it was for the purpose of conducting tests and
procuring requisite data which was exclusively used to seek regulatory
approval in the USA. Accordingly, in view of the fact that Section 107A
specifically provides for uses reasonably related to seeking regulatory
approval in countries other than India, it cannot be argued that Section 107A
prohibits exports.
47. Bayer‟s reliance on the 'Notes on Clause' of the Patents (Second
amendment) Bill, 1999 which first sought to introduce section 107A, was
contested and it was submitted that the Joint Parliamentary Committee made
numerous changes to the provision, which is evident from a bare perusal of
the final provision which was enacted as also the Notes on Clauses detailed
in the Joint Parliamentary Committee Report of the 1999 Bill. Therefore, it
is evident that the scope of the said Section was expanded beyond India and
the limitation of only the Indian market were specifically removed.
48. Ms. Chaudhary urged that a look at Section 107A reveals that it does
not impose any restriction on the quantity which can be made, constructed,
used, sold or imported as long as all such quantity is utilized solely for uses
reasonably related to 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. Different countries have different regulatory regimes and
FAO (OS) (COMM) 169/2017 Page 35 of 90
requirements whereby the data required to be submitted at the time of
seeking any regulatory approval varies from region to region based on local
testing required which may vary anywhere from redoing complete clinical
trials or certain phases of it. For example, in India, Phase III clinical trials
have to be undertaken in India under the Drugs and Cosmetics Act, 1940,
bioavailability/bio equivalent studies, stability data which covers both
accelerated and real time data are to be performed in India. Such testing
requires different quantities depending on the drug, the dosage, the mode of
delivery (tablets, capsules, injection, Intravenous Therapy etc.) and may vary
from, for example, one pilot scale batch of 100,000 tablets to 3 pilot scale
batches of 100,000 tablets. These, coupled with the fact that an entity may
have multiple clients in a country, who would want to procure the patented
product for testing, establishes that placing any restriction on the quantity to
be used under Section 107A of the Act would result in impinging upon the
fundamental rights of drug makers/manufacturers in complete contravention
of the legislative intent behind incorporating Section 107A of the Act. It is
urged that it is a well settled principle of law that it is not open for a party to
seek legislative enactments from a court of law under the guise of judicial
interpretation. Accordingly, it is not open for the court to put in multiple
restrictions while interpreting Section 107A as is sought by Bayer inasmuch
as the entire exercise under the present litigation is: (a) to impose
unreasonable restrictions on export under Section 107A to the effect of
completely excluding it from the purview of the said provision (b) to create
an automatic presumption of infringement immediately upon any use, sale or
export of patented product even though the same is declared to be for
FAO (OS) (COMM) 169/2017 Page 36 of 90
regulatory purposes and there is nothing to prove otherwise, so as to
completely shift the onus of infringement from the plaintiff to the defendant.
Relevant provisions of the Patents Act:
49. Sections 48, 84, 92A, 107 and 107A of the Act read as follows:
―48. Rights of patentees
Subject to the other provisions contained in this Act and the
conditions specified in section 47, a patent granted under this
Act shall confer upon the patentee--
(a) 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:
(b) where the subject matter of the patent is a process 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:‖
XXXXXX XXXXXX XXXXXX
84. Compulsory licences
(1) At any time after the expiration of three years from the date
of the 1[grant] of a patent, any person interested may make an
application to the Controller for grant of compulsory licence on
patent on any of the following grounds, namely:--
(a) that the reasonable requirements of the public with
respect to the patented invention have not been satisfied,
or
(b) that the patented invention is not available to the
public at a reasonably affordable price, or
FAO (OS) (COMM) 169/2017 Page 37 of 90
(c) that the patented invention is not worked in the
territory of India.
(2) An application under this section may be made by any
person notwithstanding that he is already the holder of a
licence under the patent and no person shall be estopped from
alleging that the reasonable requirements of the public with
respect to the patented invention are not satisfied or that the
patented invention is not worked in the territory of India or that
the patented invention is not available to the public at a
reasonably affordable price by reason of any admission made
by him, whether in such a licence or otherwise or by reason of
his having accepted such a licence.
(3) Every application under sub-section (1) shall contain a
statement setting out the nature of the applicant's interest
together with such particulars as may be prescribed and the
facts upon which the application is based.
(4) The Controller, if satisfied that the reasonable requirements
of the public with respect to the patented invention have not
been satisfied or that the patented invention is not worked in the
territory of India or that the patented invention is not available
to the public at a reasonably price, may grant a licence upon
such terms as he may deem fit.
(5) Where the Controller directs the patentee to grant a licence
he may, as incidental thereto, exercise the powers set out in
section 88.
(6) In considering the application filed under this section, the
Controller shall take into account,--
(i) the nature of the invention, the time which has elapsed since
the sealing of the patent and the measures already taken by the
patentee or any licensee to make full use of the invention;
FAO (OS) (COMM) 169/2017 Page 38 of 90
(jj) the ability of the applicant to work the invention to the
public advantage;
(iii) the capacity of the applicant to undertake the risk in
providing capital and working the invention, if the application
were granted;
(iv) as to whether the applicant has made efforts to obtain a
licence from the patentee on reasonable terms and conditions
and such efforts have not been successful within a reasonable
period as the Controller may deem fit: PROVIDED that this
clause shall not be applicable in case of national emergency or
other circumstances of extreme urgency or in case of public
non-commercial use or on establishment of a ground of anti-
competitive practices adopted by the patentee, but shall not be
required to take into account matters subsequent to the making
of the application.
[Explanation : For the purposes of clause (iv), "reasonable
period" shall be construed as a period not ordinarily exceeding
a period of six months.]
(7) For the purposes of this Chapter, the reasonable
requirements of the public shall be deemed not to have been
satisfied--
(a) if, by reason of the refusal of the patentee to grant a licence
or licences on reasonable terms,--
(i) an existing trade or industry or the development thereof or
the establishment of any new trade or industry in India or the
trade or industry in India or the trade or industry of any person
or class of persons trading or manufacturing in India is
prejudiced; or (ii) the demand for the patented article has not
been met to an adequate extent or on reasonable terms; or
(iii) a market for export of the patented article manufactured in
India is not being supplied or developed; or
FAO (OS) (COMM) 169/2017 Page 39 of 90
(iv) the establishment or development of commercial activities
in India is prejudiced; or
(b) if, by reason of conditions imposed by the patentee upon the
grant of licences under the patent or upon the purchase, hire or
use of the patented article or process, the manufacture, use or
sale of materials not protected by the patent, or the
establishment or development of any trade or industry in India,
is prejudiced; or
(c) if the patentee imposes a condition upon the grant of
licences under the patent to provide exclusive grant back,
prevention to challenges to the validity of patent or coercive
package licensing; or
(d) if the patented invention is not being worked in the territory
of India on a commercial scale to an adequate extent or is not
being so worked to the fullest extent that is reasonably
practicable; or
(e) if the working of the patented invention in the territory of
India on a commercial scale is being prevented or hindered by
the importation from abroad of the patented article by--
(i) the patentee or persons claiming under him; or
(ii) persons directly or indirectly purchasing from him;
or
(iii) other persons against whom the patentee is not
taking or has not taken proceedingsfor infringement.
XXXXXX XXXXXX XXXXXX
90 Terms and conditions of compulsory licences. -
(1) In settling the terms and conditions of a licence under
section 84, the Controller shall endeavour to secure-
FAO (OS) (COMM) 169/2017 Page 40 of 90
(i) that the royalty and other remuneration, if any, reserved to
the patentee or other person beneficially entitled to the patent,
is reasonable, having regard to the nature of the invention, the
expenditure incurred by the patentee in making the invention or
in developing it and obtaining a patent and keeping it in force
and other relevant factors;
(ii) that the patented invention is worked to the fullest extent by
the person to whom the licence is granted and with reasonable
profit to him;
(iii) that the patented articles are made available to the public
at reasonably affordable prices;
(iv) that the licence granted is a non-exclusive licence;
(v) that the right of the licensee is non-assignable;
(vi) that the licence is for the balance term of the patent unless
a shorter term is consistent with public interest;
179
[(vii) that the licence is granted with a predominant purpose
of supply in the Indian market and that the licensee may also
export the patented product, if need be in accordance with the
provisions of sub-clause (iii) of clause (a) of sub-section (7) of
section 84;
(viii) that in the case of semi-conductor technology, the licence
granted is to work the invention for public non-commercial use;
(ix) that in case the licence is granted to remedy a practice
determined after judicial or administrative process to be anti-
competitive, the licensee shall be permitted to export the
patented product, if need be.]
(2) No licence granted by the Controller shall authorise the
licensee to import the patented article or an article or
substance made by a patented process from abroad where such
FAO (OS) (COMM) 169/2017 Page 41 of 90
importation would, but for such authorisation, constitute an
infringement of the rights of the patentee.
(3) Notwithstanding anything contained in sub-section (2), the
Central Government may, if in its opinion it is necessary so to
do, in the public interest, direct the Controller at any time to
authorise any licensee in respect of a patent to import the
patented article or an article or substance made by a patented
process from abroad (subject to such conditions as it considers
necessary to impose relating among other matters to the royalty
and other remuneration, if any, payable to the patentee, the
quantum of import, the sale price of the imported article and
the period of importation), and thereupon the Controller shall
give effect to the directions.
XXXXXX XXXXXX XXXXXX
92A Compulsory licence for export of patented pharmaceutical
products in certain exceptional circumstances. -
(1) Compulsory licence shall be available for manufacture and
export of patented pharmaceutical products to any country
having insufficient or no manufacturing capacity in the
pharmaceutical sector for the concerned product to address
public health problems, provided compulsory licence has been
granted by such country or such country has, by notification or
otherwise, allowed importation of the patented pharmaceutical
products from India.
(2) The Controller shall, on receipt of an application in the
prescribed manner, grant a compulsory licence solely for
manufacture and export of the concerned pharmaceutical
product to such country under such terms and conditions as
may be specified and published by him.
(3) The provisions of sub-sections (1) and (2) shall be without
prejudice to the extent to which pharmaceutical products
produced under a compulsory license can be exported under
any other provision of this Act. Explanation. -For the purposes
FAO (OS) (COMM) 169/2017 Page 42 of 90
of this section, 'pharmaceutical products' means any patented
product, or product manufactured through a patented process,
of the pharmaceutical sector needed to address public health
problems and shall be inclusive of ingredients necessary for
their manufacture and diagnostic kits required for their use.
XXXXXX XXXXXX XXXXXX
107. Defences, etc ., in suits for infringement. -
(1) In any suit for infringement of a patent every ground on
which it may be revoked under section 64 shall be available as
a ground for defence.
(2) In any suit for infringement of a patent by the making, using
or importation of any machine, apparatus or other article or by
the using of any process or by the importation, use or
distribution or any medicine or drug, it shall be a ground for
defence that such making, using, importation or distribution is
in accordance with any one or more of the conditions specified
in section 47.
107A Certain acts not to be considered as infringement. -For
the purposes of this Act,-
(a) any act of making, constructing, 197 [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, 198 [use, sale or import] of any product;
(b) importation of patented products by any person from a
person 199 [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.‖
TRIPS- Relevant provisions
50. The relevant TRIPS provisions are extracted below:
FAO (OS) (COMM) 169/2017 Page 43 of 90
"Article 30
Exceptions to Rights Conferred
Members may 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 account of the legitimate
interests of third parties.‖
Emergence of the research exception
51. Much before the evolution of the Bolar doctrine (through the decision
in Roche) non-commercial, academic research of the art underlying a patent,
or the determination of the use of the patent, was recognized. Thus, for
instance in Whittemore v Cutter, 29 F. Cas. 1120, 1121 (No. 17,600) (C.C.D.
Mass. 1813) Justice Joseph Story articulated the principle as follows:
"[i]t could never have been the intention of the legislature to
punish a man who constructed such a machine merely for
philosophical experiments, or for the purpose of ascertaining
the sufficiency of the machine to produce its described effects."
52. The next phase in the development of this branch was in Roche where
the patentee plaintiff Roche Products, Inc. (Roche), a large research-oriented
pharmaceutical company, wanted the United States district court to enjoin
Bolar Pharmaceutical Co., Inc. (Bolar), a manufacturer of generic drugs,
from taking, during the life of a patent, the statutory and regulatory steps
necessary to market, after the patent expired, a drug equivalent to a patented
brand name drug. Roche argued that the use of a patented drug for federally
mandated premarketing tests is a use in violation of the patent laws. The
district court recognized that the issue in the case was narrow: did limited
FAO (OS) (COMM) 169/2017 Page 44 of 90
use of a patented drug for testing and investigation strictly related to FDA
drug approval requirements during the last 6 months of a patent‟s term
constitute a use which, unless licensed, was infringement. The district court
held that it was not an infringement. The Federal Circuit Appellate court
reversed the trial court‟s order, holding that:
―Bolar may intend to perform "experiments," but unlicensed
experiments conducted with a view to the adoption of the
patented invention to the experimentor's business is a violation
of the rights of the patentee to exclude others from using his
patented invention. It is obvious here that it is a misnomer to
call the intended use de minimis. It is no trifle in its economic
effect on the parties even if the quantity used is small. It is no
dilettante affair such as Justice Story envisioned. We cannot
construe the experimental use rule so broadly as to allow a
violation of the patent laws in the guise of "scientific inquiry,"
when that inquiry has definite, cognizable, and not
insubstantial commercial purposes.‖
53. Soon after this judgment, the US Congress enacted a law permitting
use of patented products in experiments for the purpose of obtaining Food
and Drug Administration (FDA) approval [Section 271(e)(1)]. This
provision, known as the research exemption, consolidated the Bolar research
exception articulated by the US District Court, which was reversed in the
Federal Circuit decision. The new provision (Section 271 (e)(i)) reads as
follows:
―(e) (1)It shall not be an act of infringement to make, use, offer
to sell , or sell within the United States or import into the
United States a patented invention (other than a new animal
drug or veterinary biological product (as those terms are used
in the Federal Food, Drug, and Cosmetic Act and the Act
of March 4, 1913) which is primarily manufactured using
FAO (OS) (COMM) 169/2017 Page 45 of 90
recombinant DNA, recombinant RNA, hybridoma technology,
or other processes involving site specific genetic manipulation
techniques) solely for uses reasonably related to the
development and submission of information under a Federal
law which regulates the manufacture, use, or sale of drugs or
veterinary biological products.‖
54. It is noticeable that the provision does not expressly enable
development and submission of information under a law other than a
―Federal law which regulates the manufacture, use, or sale of drugs or
veterinary biological products‖ implying that the use of the patented
invention in relation to regulatory approval abroad was not authorized. Yet,
in Intermedics, Ventritex used the clinical trial data obtained under the
protection of Section 271(e)(1) to solicit money to fund further clinical trials
after the patent term expired; Ventritex also used this data to obtain patent
rights in other countries. The court noted that an otherwise infringing
activity is exempt if:
―It [would] have been reasonable, objectively, for a party in
defendant's situation to believe that there was a decent prospect
that the "use" in question would contribute (relatively directly)
to the generation of kinds of information that was likely to be
relevant in the processes by which the FDA would decide
whether to approve the product.‖
55. The court, therefore, held that Ventritex's uses did not infringe the
patent, and the Federal Circuit affirmed the district court's decision,
suggesting that Congress intended that Section271(e)(1) be used to shelter
all products seeking FDA approval, regardless of their projected
commercialization date.
FAO (OS) (COMM) 169/2017 Page 46 of 90
56. In Merck KGaA v. Integra Lifesciences Ltd., 545 U.S. 193, 200
(2005), the US Supreme Court had the occasion to consider the experimental
exception. Integra owned several patents, including a "short tri-peptide
segment of fibronectin" with the amino acid sequence Arg-Gly-Arg, known
as the RGD peptide. The defendant, Merck hired one Dr. Cheresh, a scientist
at a research institute, to investigate compounds with the same receptor
blocking capability as the RGD peptides. Integra offered to license their
patents to Merck, which declined the offer. Integra sued Merck, Scripps, and
Dr. Cheresh for patent infringement. The district court rejected the
defendant‟s research exception based argument. This ruling was affirmed by
the Federal Circuit court, which held that:
"the Scripps work sponsored by Merck was not clinical testing
to supply information to the FDA, but only general biomedical
research to identify new pharmaceutical compounds."
57. The US Supreme Court judgment unanimously reversed the Federal
Circuit judgment and disapproved the narrow interpretation of the
experimental use provision, stating that:
"as an initial matter, we think it apparent from the statutory text
that §271(e)(1)'s exemption from infringement extends to all
uses of patented inventions that are reasonably related to the
development and submission of any information under the
FDCA."
58. The Supreme Court further said
"this [information] necessarily includes preclinical studies of
patented compounds that are appropriate for submission to the
FDA in the regulatory process."
FAO (OS) (COMM) 169/2017 Page 47 of 90
And that to construe § 271(e)(1) what the Federal Circuit did:
"is effectively to limit assurance of exemption to the activities
necessary to seek approval of a generic drug.‖
59. In Japan, acts relating to the marketing approval of pharma products
were deemed by the Supreme Court covered by its Patents law‟s
experimentation exception. In a unanimous decision, the court in Ono
Pharmaceuticals Co., Ltd. v Kyoto Pharmaceutical Industries, Ltd 1999 (30)
IIC 448, held that tests during the patent term for obtaining data needed for
regulatory approval were not infringing acts, under section 69(1) of the
Japanese Patent law.
60. In the UK, the experimental use exception followed an unusual
trajectory of development. The experimental use exemption was inserted by
Section 60(5)(b) of the Patents Act 1977. This is still in force and it applies
to all patent subject matter, including medicines, medical devices and
agrochemicals. In Monsanto v Stauffer 1985 RPC 515, the defendants
sought the modification to an injunction that had been ordered against the
manufacture and sale of their Touchdown herbicide for agricultural use. The
Court of Appeal permitted limited modifications to the injunction so that it
did not prevent the defendants from conducting experiments on Touchdown
in laboratories or glasshouses in the UK to find out more about it. But the
court did not permit field trials for the purpose of commercial clearance from
the Pesticides Safety Precautions Scheme and approval from the Agricultural
Chemicals Approval Scheme (that existed under legislation at the time).
Explaining, where the line is to be drawn between exempted and non-
FAO (OS) (COMM) 169/2017 Page 48 of 90
exempted experiments under the Original Experimental Use Exemption, the
court stated:
―Trials carried out in order to discover
something unknown, or to test an hypothesis, or even in
order to find out whether something which is known to
work in specific conditions, e.g. of soil or weather, will
work in different conditions can fairly ... be regarded as
experiments. But trials carried out in order to demonstrate
to a third party that a product works or, in order to amass
information to satisfy a third party, whether a customer or
a [regulatory] body such as the PSPS or ACAS, that the
product works as its maker claims are not to be regarded
as acts done for 'experimental purposes'‖
61. Exempted experiments therefore, are those that generate new
knowledge, but not those that verifying existing knowledge, for example for
getting regulatory clearance. The later decision of the Court of Appeal in
Auchinclossv Agricultural and Veterinary Supplies and Others [1999]
RPC 397 is in line with this, as it holds that making and experimenting with
a patented invention merely for the purposes of gaining official approval
would not fall within the Original Experimental Use Exemption. The facts of
the Auchincloss case again concern agrochemicals: a sample of a dry water-
soluble biocidal composition sent by the defendant to MAFF, the old
Ministry of Agriculture, Fisheries and Food. Here, the Court of Appeal held
that supplying a sample to MAFF in order to obtain official approval rather
than to discover something unknown or to test a hypothesis, was not covered
by the exemption. The UK courts thus distinguish between application of the
experimental use exemption to activity conducted for the purpose of
discovering something new (about the subject matter of the invention), and
FAO (OS) (COMM) 169/2017 Page 49 of 90
mere verification of what is already known. If trials and tests on a substance
for regulatory approval of that substance are not discovering something new,
the exemption is inapplicable. It is accepted that this is the case as regards
bioequivalence studies for an abridged application - they cannot be
protected; there is also lack of clarity that full clinical trials would be
protected.
62. The new exemption was enacted in the wake of concerns that the UK
was losing opportunities to conduct work in support of getting marketing
authorizations, such as trials, because of the limited UK Bolar Exemption. It
is therefore concerned specifically with medicinal products. This new
Exemption came into force on 01.10.2014, by way of addition to the
Original Exemption. However, as stated above, the Original Experimental
Use Exemption and the Bolar Exemption, remain intact. A medicinal product
assessment is defined as
"any testing, course of testing or other activity undertaken with
a view to providing data for purposes which include the
following:
obtaining or varying an authorisation to sell or supply,
or offer to sell or supply, a medicinal product (whether
in the United Kingdom or elsewhere);
complying with any regulatory requirement imposed
(whether in the United Kingdom or elsewhere) in
relation to such an authorisation;
enabling a government or public authority (whether in
the United Kingdom or elsewhere), or a person
(whether in the United Kingdom or elsewhere) with
functions of--
providing health care on behalf of such a government
or public authority,
FAO (OS) (COMM) 169/2017 Page 50 of 90
63. Therefore, in addition to activities covered by the Bolar Exemption,
the preparation and running of clinical trials on innovative drugs for
marketing authorisation are also exempt. Furthermore, work undertaken in
the UK in support of a regulatory filing in a country outside of the EU is also
now covered.
64. The statutory exemption to infringement under Canadian law is
embodied in Section 55.2(1) of its Patent Act which provides that:
―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.‖
65. This provision concerns activities relating to the development and
submission of information required by a regulatory body. The Canadian
provision is agnostic and sector neutral, in that it concerns with regulatory
approval for inventions in all areas of technology and is not restricted to
pharmaceuticals. The disputes before the Canadian courts are primarily in
the pharmaceutical area, most often in the context of generic manufacturers
performing tests in respect of a patented drug. Also, this provision relates to
information that may be required by a regulatory body anywhere (and not
just in Canada).
66. A leading Canadian decision, Merck et al. v. Apotex (2006) FCA
323, (Federal Court of Appeal), was in the context of a generic drug
development. The court held that the defendant prepared and tested the
FAO (OS) (COMM) 169/2017 Page 51 of 90
patented Lisinopril drug for the purposes of filing abbreviated new drug
submissions necessary to sell Lisinopril in Canada and the USA. Some of
the data was referenced in Apotex's submissions, directed to that purpose.
Apotex also had stored samples in the event that they were required for
future reference by the government. The court held that Section 55.2(1) was
broad enough to exempt such generic drug development activities from
infringement. The safe-harbour provision can protect activities reasonably
related to development and submission of information required by law,
either before or after market approval. The court also found that Apotex's
use of Lisinopril in ongoing research and development of alternate
formulations and alternate techniques for tablet-making fell within
the common law exemption to infringement. This was because they did not
proceed beyond an experimental (testing) phase and did not take steps to
manufacture, promote and sell the product.
67. In the opinion of the court, the course of the experimental exception-
both before and after the TRIPS has shown the adoption, generally of a
broad approach, to permit use of all kinds. Broadly, the courts‟ approach has
been not to enjoin or prohibit purely experimental or scientific activity, as
long as it does not have any primary commercial undertones.
Legislative history of Section 107A
68. Curiously, predating Section 107A the Indian Parliament had enacted
a research exception, Section 47 which stated, inter alia,[by Section 47 (3)]
that:
FAO (OS) (COMM) 169/2017 Page 52 of 90
"47. Grant of patents to be subject to certain conditions.--The
grant of a patent under this Act shall be subject to the condition
that--
*****
(3) any machine, apparatus or other article in respect of which
the patent is granted or any article made by the use of the
process in respect of which the patent is granted, may be made
or used, and any process in respect of which the patent is
granted may be used, by any person, or the purpose merely of
experiment or research including the imparting of instructions
to pupils...‖
69. This provision has been retained in the statute book. This was
suggested by the committee, constituted in 1957, under the chairmanship of
Justice N. Rajagopala Ayyangar to take a fresh look at patent law to suggest
the best way to best sub-serve the contemporary needs of India. Justice
Ayyangar‟s Report on Patent Law Revision of September 1959 was the basis
of the Patents Act, 1970. The report noticed that the right of researchers, to
use the invention - whether it be an article or a process - for the purposes of
carrying out experiments - in the course of research, as distinguished from
use for a commercial purpose is one matter in connection with the right of
patentees had to be clarified. In this connection, while taking note of the
uncertainty of the law on this topic in the U.K., Justice Ayyangar took the
view that:
"I consider it desirable that the law should specifically exempt
use of the patented articles or processes or the use of articles or
products made by the use of the patented process or patented
machine or apparatus for experimental purposes from being
actionable as an infringement."
70. The amendment of 1999 to the Patents Act was pre-dated by a report
of the Joint Parliamentary Committee. It recommended introduction of a
Bolar exemption provision. The report explained the reason for Clause 51
(which was to be the amendment):
―Clause 51: this clause seeks to insert a new Section 107A in
the principal Act, relating to certain acts which are not to be
considered as infringement. This provision has been made to
ensure prompt availability of products, particularly generic
drugs, immediately after the 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. The other amendment in this clause is correction of a
typographical error.‖
71. The Notes on clauses, amending the Act, through the Bill reads as
follows:
"this clause seeks to insert a new section 107A in the Act,
relating to certain acts which are not to be considered
infringements. It is proposed that the act of making or using a
patented product for the purpose of development and
submission of information to a regulatory authority regulating
marketing approval of the product, shall not constitute an
infringement. This provision is proposed to ensure that generic
drug should be available in Indian market immediately after the
expiry of the term of the concerned patents.‖
72. The Patents (Second Amendment) Bill, 1999 reads as follows:
―After section 107 of the principal Act. the following section
shall be inserted, namely:
Clause 51. After section 107 of the principal act, the following
section shall be inserted, namely
―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 of
marketing approval for the product of invention.‖
73. In the Statement of Objects and Reasons (introducing the Amending
Act), it was stated that:
―4. Some of the salient features of the Bill are....
―(h) to make a provision enabling persons other than patent
holder to obtain marketing approval from the appropriate
regulatory authorities within three years before the expiration
of the term of the patent‖
74. Eventually, the Patents Amendment Act of 2002 was enacted; it stated
as follows:
―44. After section 107 of the Principal Act, the following
section shall be inserted namely,
107A: For the purposes of this Act
(a) Any act of making, constructing, using or selling 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 or sale of any
product‖
75. The Patent (Amendment) Bill, 2003 proposed insertion of the
expression "import" as follows:
―107A: For the purposes of this Act
(a) 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 or
sale of any product‖
76. Eventually, the Patents Amendment Act, 2005 which proposed the
amendment in its present form, was enacted; it reads as follows:
―107A: For the purposes of this Act
(a) 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 or
sale or import of any product‖
77. These stages in the amendment of the Act and the introduction of
India‟s Bolar exemption demonstrate that Parliament took a careful and
nuanced view of the matter; it also had the benefit of provisions enacted in
other countries, including the US and Canadian law.
A Interpretation of "sale" and whether it encompasses "exports"
78. Rival arguments were addressed with respect to the expression "sale"
and whether it comprehends "export". Bayer contended that the use of "sale"
along with "import" excluded the term "export" from the meaning of the
expression "sale" which is otherwise wide. In aid of this, it was contended
that Section 84 and Section 92A used the term "export" expressly and that,
given this clear internal clue from the statute, the court should not accept
Natco‟s contention that an export transaction is covered by sale. According
to Bayer, the learned single judge erred in writing into the statute an
expression which was omitted by resorting to an over liberal interpretation of
a causus omissius. A third argument made was that only those extra-
territorial aspects which have an impact or nexus with India and are enacted
with the intent of creating some benefit for India would fall within the
constitutionally sanctioned idea of legislative competence; since none can be
said to accrue to India, the term "export" should not be read into the
expression "sell". Lastly it was argued that Section 107A is in the nature of a
proviso or exception to Section 48, which defines the content and rights of a
patentee and that the court should, consistent with the interpretation of any
proviso, ensure that it is kept within the bounds of what is sought to be
excepted. Natco disputed each of these contentions, urging that "sell" should
not be juxtaposed with other provisions which expressly talk of export and
that the court should consider the context of Section 84 and Section 92A the
underlying purposes of which are entirely different from Section 107A. It
was highlighted that the references to "other country" in Section 107A
would be meaningless if export is not construed to be part of "sell" and that
an export is but a species of sale. Also, Natco relied on the term "construct"
occurring in Section 107A and stated that the use of "sell" "import" and
"construct" permit all range of transactions and uses covered by the
provision. It was contended that considerations of extra territorial impact of
any provision do not arise. Lastly it was urged that Section 107A - in its
placement and having regard to its legislative history is clearly not an
exception or proviso, but a special provision which must be given full
meaning and effect.
79. Two clear strands of reasoning have prevailed in various judgments of
the Supreme Court, while interpreting the meaning and purport of general
words. One, that plain and natural meaning should be preferred ordinarily,
and two, that the context and purpose of the provision should always be kept
in mind. Thus, in Polestar Electronic (Pvt.) Ltd. v Additional Commissioner,
Sales Tax and Anr. (1978) 1 SCC 636, it was held:
―11. ... If the language of a statute is clear and explicit, effect
must be given to it, for in such a case the words best declare the
intention of the law-giver. It would not be right to refuse to place
on the language of the statute the plain and natural meaning
which it must bear on the ground that it produces a consequence
which could not have been intended by the legislature. It is only
from the language of the statute that the intention of the
Legislature must be gathered, for the legislature means no more
and no less than what it says. It is not permissible to the Court to
speculate as to what the Legislature must have intended and
then to twist or bend the language of the statute to make it
accord with the presumed intention of the legislature. ...‖
80. Central Bank of India v State of Kerala and Ors. (2009) 4 SCC 94, a
three-Judge Bench judgment, quoted Professor H.A. Smith (as quoted in
Justice G.P. Singh‟s Principles of Statutory Interpretation) to the following
effect:
―'No word', says Professor H.A. Smith 'has an absolute
meaning, for no words can be defined in vacuo, or without
reference to some context'. According to Sutherland there is a
'basic fallacy' in saying 'that words have meaning in and of
themselves', and 'reference to the abstract meaning of words',
states Craies, 'if there be any such thing, is of little value in
interpreting statutes'. ... in determining the meaning of any word
or phrase in a statute the first question to be asked is - 'What is
the natural or ordinary meaning of that word or phrase in its
context in the statute? It is only when that meaning leads to
some result which cannot reasonably be supposed to have been
the intention of the legislature, that it is proper to look for some
other possible meaning of the word or phrase.' The context, as
already seen, in the construction of statutes, means the statute as
a whole, the previous state of the law, other statutes in pari
materia, the general scope of the statute and the mischief that it
was intended to remedy.‖
81. Speaking of the use of an expression or term in different parts of a
statute, the court held in Central Bank of India v Ravindra & Ors. (2002) 1
SCC 36 that:
―42. ...Ordinarily, a word or expression used at several places
in one enactment should be assigned the same meaning so as to
avoid "a head-on clash" between two meanings assigned to the
same word or expression occurring at two places in the same
enactment. It should not be lightly assumed that "Parliament
had given with one hand what it took away with the other" (see
Principles of Statutory Interpretation, Justice G.P. Singh, 7th
Edn. 1999, p. 113). That construction is to be rejected which
will introduce uncertainty, friction or confusion into the
working of the system (ibid, p. 119). While embarking upon
interpretation of words and expressions used in a statute it is
possible to find a situation when the same word or expression
may have somewhat different meaning at different places
depending on the subject or context. This is however an
exception which can be resorted to only in the event of
repugnancy in the subject or context being spelled out. It has
been the consistent view of the Supreme Court that when the
legislature used same word or expression in different parts of
the same section or statute, there is a presumption that the
word is used in the same sense throughout (ibid, p. 263). More
correct statement of the rule is, as held by the House of Lords
in Farrell v. Alexander All ER at p. 736b, "where the draftsman
uses the same word or phrase in similar contexts, he must be
presumed to intend it in each place to bear the same meaning".
The court having accepted invitation to embark upon
interpretative expedition shall identify on its radar the
contextual use of the word or expression and then determine its
direction avoiding collision with icebergs of inconsistency and
repugnancy.‖
82. It is, therefore, clear that whilst there is one rule generally speaking,
use of a term or expression in a statute, carries upon it to be interpreted in the
same manner in all provisions of that statute, the rule is neither inflexible
admitting no exception nor of universal application. The object of the
concerned provision is one of the important factors which weigh in while
interpreting whether the same meaning has to be attributed to all parts of the
statute. Given these circumstances, this Court is of the opinion that "exports"
is used in different contexts in Sections 84, 90 and 92A. Section 84 is the
provision which enables compulsory licensing of certain conditions. Section
84(7) spells out what are reasonable requirements of the public. These are
deemed not to have been satisfied if under Section 84(7)(a)(iii), a market for
the patented article manufactured in India is not being supplied or developed.
Section 90(1)(vii) is in a sense, complimentary to Section 84 and has to be
read with it: it guides the Controller to ensure inter alia that the license
granted under Section 84(7)(a)(c)(iii) is with the predominant purpose of
supply to the Indian market and that the licensee may also export the
patented product.
83. Section 92A is a species of compulsory license. The principles in one
sense are even an exception to it. The provision dealing with compulsory
licensing [Section 84] is concerned only with the availability of patented
market, of reasonable terms for users in India. Therefore, the question of
reasonable requirements of other countries does not arise and yet the
Parliament, in keeping with TRIPS, (cognizant of the broad classification of
nations as developed, developing and least developed countries), envisioned
Section 92A which enables licensing for export of patented pharmaceutical
products in exceptional circumstances, i.e. whether the country concerned
has insufficient or no manufacturing capacity in the pharmaceutical sector.
Really speaking, this provision, i.e. Section 92A constitutes an exception to
the general rule that compulsory licensing is only resorted primarily and
predominantly to cater to the needs of the domestic market of the host
country with regard also being had to export potential from that country.
84. Having regard to all these factors, it cannot be held that the Parliament
intended to per se exclude "exports" from the sweep and width of the term
"sale" in Section 107A regard being had to the disparate and differing
objectives of Sections 84, 90 and 92A all of which in some way or the other
primarily deal with compulsory licensing and on the other hand, Section
107A is the only provision that allows an exception to be used- construction
and sale of a patented article only for research purposes and subject to
fulfillment of the conditions specified therein. The next argument which
Bayer strongly advanced with respect to exclusion of exports from the term
"sale" is that patent rights are territorial in nature, specific allusion was made
to Section 48 in this regard. Elaborating, it was contended that the grant of a
patent constitutes a negative right to prevent third parties from making,
using, forwarding for sale, selling or importing the patented product in India.
Secondly, it was urged that the research exception, can be accepted, and
needs to be carried out in India if the benefit of that provision is to be
secured.
85. It was submitted that Section 107A(a) really constitutes an exception
and its effect has to be strictly confined to the extent the terms of the
expression spelt out and no more. Reliance was placed upon Mohan Kumar
Singhania v UOI AIR 1992 SC 1. There are a line of judgments which state
that a particular provision of an enactment cannot be said to nullify or set at
nought the main or substantive provision. In Dwarka Prasad v Dwarka Das
Saraf 1976 (1) SCC 128, it was stated as follows:
―18. We may mention in fairness to Counsel that the following,
among other decisions, were cited at the Bar bearing on the
uses of provisos in statutes: CIT v. Indo-Mercantile Bank Ltd.,
AIR 1959 SC 713]; Ram Narain Sons Ltd. v. Asstt. (1955) 2
SCR 483, 493:]; Thompson v. Dibdin [(1912) AC 533, 541; Rex
v. Dibdin [1910 Pro Div 57, 119, 125] and Tahsildar Singh v.
State of U.P. AIR 1959 Supp (2) SCR 875,]. The law is trite. A
proviso must be limited to the subject-matter of the enacting
clause. It is a settled Rule of construction that a proviso must
prima facie be read and considered in relation to the principal
matter to which it is a proviso. It is not a separate or
independent enactment. "Words are dependent on the principal
enacting words to which they are tacked as a proviso. They
cannot be read as divorced from their context"
(Thompson v. Dibdin, 1912 AC 533). If the Rule of construction
is that prima facie a proviso should be limited in its operation
to the subject-matter of the enacting clause, the stand we have
taken is sound. To expand the enacting clause, inflated by the
proviso, sins against the fundamental Rule of construction that
a proviso must be considered in relation to the principal matter
to which it stands as a proviso. A proviso ordinarily is but a
proviso, although the golden Rule is to read the whole section,
inclusive of the proviso, in such manner that they mutually
throw light on each other and result in a harmonious
construction.
The proper course is to apply the broad general Rule of
construction which is that a Section or enactment must be
construed as a whole, each portion throwing light if need be on
the rest.
The true principle undoubtedly is, that the sound interpretation
and meaning of the statute, on a view of the enacting clause,
saving clause, and proviso, taken and construed together is to
prevail.(Maxwell on Interpretation of Statutes, 10th Edn., p.
162)‖
86. In S. Sundaram Pillai v V.R. Pattabiraman1985 (1) SCC 591, it was
held that:
"27. The next question that arises for consideration is as to
what is the scope of a proviso and what is the ambit of an
Explanation either to a proviso or to any other statutory
provision. We shall first take up the question of the nature,
scope and extent of a proviso. The well-established Rule of
interpretation of a proviso is that a proviso may have three
separate functions. Normally, a proviso is meant to be an
exception to something within the main enactment or to qualify
something enacted therein which but for the proviso would be
within the purview of the enactment. In other words, a proviso
cannot be torn apart from the main enactment nor can it be
used to nullify or set at naught the real object of the main
enactment.(Emphasis supplied)‖
87. Likewise, in J.K. Industries Ltd. v Chief Inspector of Factories and
Boilers 1996 (6) SCC 665, it was held as follows:
―33. A proviso to a provision in a statute has several functions
and while interpreting a provision of the statute, the court is
required to carefully scrutinise and find out the real object of
the proviso appended to that provision. It is not a proper Rule
of interpretation of a proviso that the enacting part or the main
part of the Section be construed first without reference to the
proviso and if the same is found to be ambiguous only then
recourse may be had to examine the proviso as has been
canvassed before us. On the other hand an accepted Rule of
interpretation is that a Section and the proviso thereto must be
construed as a whole, each portion throwing light, if need be,
on the rest. A proviso is normally used to remove special cases
from the general enactment and provide for them specially.
34. A proviso qualifies the generality of the main enactment
by providing an exception and taking out from the main
provision, a portion, which, but for the proviso would be a part
of the main provision. A proviso must, therefore, be considered
in relation to the principal matter to which it stands as a
proviso. A proviso should not be read as if providing something
by way of addition to the main provision which is foreign to the
main provision itself.
(Emphasis supplied)‖
88. In the present case, this court notices that Section 107A is not made
subject to the other provisions of the Act - on the other hand, Section 48,
which talks of the rights of a patent holder is subject to other provisions of
the Act that includes Section 107A. Furthermore, Bayer‟s argument that
Section 107A constitutes an exception, cannot be accepted. It is an
independent provision with a specific history behind it and was subject to
intensive Parliamentary debate and scrutiny by a Joint Committee report.
Furthermore, it was enacted in response to the TRIPS enabling provision to
the member countries to evolve national legislation facilitating research and
progress in fields covered by the patents. The judgments cited, all generally
and invariably contended by Bayer deal with provisos embodied in the main
provision that constituted exceptions to the general rule. However, in this
case, the court is not called upon to interpret the proviso to Section 48; nor
even an exception. Bayer‟s argument that Section 107A has to be read as
subordinate to the main provision of Section 48 has to, therefore, fail. This
Court is also fortified in its conclusions. In Indian Oil Corporation v the
Chief Inspector of Factories and Ors. (1998) 5 SCC 738, the Supreme Court
had to decide whether one of the Directors only could recognise his occupier
and whether Section 2(n)(iii) of the Factories Act, 1948, applied to the IOC‟s
factories and if it was open to the Central Government to nominate any
person other than the Director or the occupier. Section 2(n) was amended to
say that "occupier" meant the person who had ultimate control over the
affairs of the factory and also that in the case of firms or associations; and as
to who could be occupiers in the case of firms and association in the case of
company (any of the Directors) and in the case of factory owned by the
Central Government, "person or persons nominated to manage the affairs of
the factory by the State Government, Central Government etc.‖. Prior to the
amendment, the "occupier" did not include the specific designated officials
or employees of the company or firms. The Supreme Court held that the
requirement of third proviso could really constitute a separate provision, and
had to be read as such. The Supreme Court held as follows:
―20. Apart from the main part of Section 2(n), the first proviso
also indicates that the Legislature intended that the person
having ultimate control over the affairs of the factory has to be
regarded as occupier of the factory. The proviso to the Section
is not in the nature of an exception. In order to avoid any
ambiguity, to plug loopholes and to seal the escape routes a
deeming provision has been made in a mandatory form. In the
case of a firm obviously the partners of the firm have ultimate
control over the affairs of the partnership. In case of other type
of association the members thereof will have such control. In
the case of a company the directors have the ultimate control,
as the power to manage the affairs of the company vests in the
Board of Directors. What clauses (i) and (ii) of the proviso
provide is that they shall be deemed to be 'occupiers'. Thus they
merely restate the position which is obvious even otherwise.
The position of the government and the local authority is quite
different from that of a firm or an association or a company not
only with respect to the person who can be said to be in
ultimate control but also with respect to the object for which
factory is set up. In a democratic set-up of Government, it may
not be possible to say with certainty as to who is having the
ultimate control. In a welfare state, the government does not
carry on such activity for its own profit or benefit but for the
benefit of the people as a whole. Moreover, it is the government
which looks after the successful implementation of the
provisions of the Factories Act and, therefore, it is not likely to
evade implementation of the beneficial provisions of the
Factories Act. That appears to be the reason why the
legislature though it fit to make a separate provision for the
Government and the local authorities. Ordinarily, for running
the factories owned or controlled by the Central Government or
any State Government, or any local authority, a person or
persons would be appointed by it to manage the affairs of the
factory, because the Government or the local authority as a
whole would not run the factory. Therefore, the legislature
appears to have provided that in case of a factory owned or
controlled by the Central Government, the State Government or
the local authority the person or persons appointed to manage
the affairs of the factory by the Central Government, State
Government or the local authority, as the case may be, shall be
deemed to be the occupier. Therefore, if it is a case of a factory
in fact and in reality owned or controlled by the Central
Government or the State Government or any local authority
then in case of such a factory the person or persons appointed
to manage the affairs of the factory shall have to be deemed to
be the occupier, even though for better management of such a
factory or factories a corporate form is adopted by the
government.
21. Before 1987, when Section 100 was the governing
provision, any one of the individual partners of a firm or any
one of the members of association of individuals could be
punished under Sub-section (I) thereof for any offence for
which the occupier of the factory was punishable. The firm or
association was given an option to nominate one of its members
as the occupier of the factory and if such an option was
exercised by giving a notice to the Inspector then he alone was
to be deemed to be the occupier of the factory for the said
purpose. Under Sub-section (2) if the occupier of the factory
was a company then any one of the directors thereof could be
prosecuted and punished. A similar option was available to the
company, as in the case of a firm and an association of
individuals. It is significant to note that it was by way of a
proviso to Sub-section (2) which dealt with case of a company
that the provision was made for deciding who should be
deemed to be the occupier of a factory in case it belonged to the
Central Government or any State Government or any local
authority and a similar option is made available to them. The
said proviso though enacted as an exception to the main part of
Sub-section (2) is truly by way of a separate provision made in
the case of a factory belonging to the Central Government or
any State Government or any local Authority. While making the
amendment in 1987 in Section 2(n) and deleting Section 100 at
the same time the Legislature made the proviso to subsection
(2) of Section 100 an independent proviso to Section 2(n). That
also clearly indicates the intention of the Legislature that it
wanted to make a separate provision for deeming who should
be the occupier of a government factory.‖
89. In the light of the above discussion, the court is of the opinion that
there is no question of treating Section 107A(a) as an exception to Section
48. Its history of interpretation by TRIPS, the discussion in the
Parliamentary Joint Committee Report, all clearly point to its being a special
provision that deals with the rights of the patented invention for research
purposes.
90. As far as the question of territoriality is concerned, Bayer‟s argument
is twofold: that the reference to regulatory requirements of other countries
and its reference to reasonable regulations or laws of other countries, for the
purpose of development of the product and its making, construction, use or
sale, is to be understood as meaning that the overseas requirements are to be
met with through experimental use in India. Explaining further, it is
contended that the reference to overseas or other nations‟ laws or regulations
with respect to research requirements is to be understood in such a way that
information development in India can be exported.
91. This Court is of the opinion that the interpretation canvassed by Bayer
is strained and artificial. Once it is held that patented inventions can be sold
for the purpose of carrying on research which fulfils the regulatory
requirements of India, there cannot be any bar or an interpretation narrowing
the scope of such sale. What is important is the purpose of the sale, i.e.
objective of carrying on experiment, research and developing information (in
the form of reports, outcomes etc.). If the purpose of the sale is to ultimately
exploit the patented invention and either work upon it or "work around" or
work it through research so as to be prepared to apply for the patent for
approval to market it once the patent tenure ends, there can be no impairment
of the patentee‟s rights. The natural consequence of that sale cannot be
curtailed by a contrived interpretation to say that it is only information that
can be sold or exported, not the patented invention. Likewise, the reference
of another country i.e the export for reasonably complying with the laws of
another country in relation to the kind of research and experimentation
needed is something that cannot be dictated by interpretation of Indian law
alone. It is plausible- even reasonable- that many nations may require
experimentation or research to be carried on in their soil nationally so as to
be able to supervise the process and then oversee the outcome. It is,
therefore, not possible to dictate the behaviour and legal requirements of
other nations by confining the research exception within the territory of
India.
92. The natural interpretation of the expression "use" is in all its senses. In
this context, it would be necessary to recognize that in regard to various
products, especially those concerning the pharmaceutical, medicinal
preparations, surgical and diagnostic purposes and those relating to the
agriculture or bio-chemical sector, it may be critical for a database of
populations, drugs and co-relation, with disease and its relationship with
characteristics that are predominantly local. National regimes might well
insist that such research and experimentation in regard to those aspects be
either entirely or at least in part be carried on in their territory. In this
context, therefore, it is held that the expressions, ―making, constructing,
using, selling or importing patented articles solely for uses reasonably
related to development and submission of information required under any
law for the time being in force...... or in a country other than India that
regulates the manufacturing, construction, use, sale or import of any
product‖, consequently, has to be given a wide import. It is, therefore, open
that the sale of the article or invention for the purpose of development of
information in compliance with the reasonable requirements of developing
countries, solely for purposes of research or development falls within
Section 107A(a).
93. There is one more manner of looking at the issue. A patent owner‟s
interests are clearly injured if the invention or the product or the method
which is the subject matter of the patent is worked for purely commercial
purposes and the ensuing product is offered in the market. Such products
would be competitors to the patented invention and because of their copycat
nature, one can reasonably expect them to be significantly lower in cost, in
the marketplace. However, in the case of sale, construction or use of the
patented article, either within India or outside the territory of India, the
question of such injury cannot ordinarily arise if the object or purpose of that
transaction is solely to experiment or research and develop information that
is reasonably related to the requirements of the law (Indian or overseas). If
one considers this aspect, it is clear that the fullest effect ought to be given to
the research exception embodied in Section 107A(a). The objections with
regard to the territoriality of patents or the strained interpretation given to the
provision of construing export (i.e. the export sale) only to sale of
information overseas, is unwarranted. Bayer‟s argument, therefore, is
rejected on this aspect.
94. This Court also finds unpersuasive, Bayer‟s subsidiary submission that
Rule 122B of the Drugs and Cosmetics Rules, 1945 permits the licensing
authority to grant permission (for a product) on the basis of data available
from other countries. Thus, Bayer‟s argument here was that the act of
importation in Section 107A refers to all such information which can be used
for regulatory purposes of the research and development in India. Here
again, the court is of the opinion that the broad nature of the provision -
which enables development and research of the product and information
related thereto, on fulfilling the regulatory or other legal requirements of
India, and other countries- cannot be construed narrowly as to permit
development and research of the product only in India, even though the
backup research is conducted elsewhere. The object and underlying purpose
of Drugs and Cosmetics Act is entirely different from those of the Patent
Act. The former deals with the range of regulatory provisions necessary for
various classes of drugs to receive licensing, marketing approvals etc. On the
other hand, the patent regime is premised solely upon the regulation of the
intellectual property right relating to patents. The court is also of the opinion
that Natco‟s status as compulsory licensee did not place it under any
additional statutory bar from exporting the product, as long as the underlying
condition in Section 107A was satisfied, as held by the learned Single Judge.
95. It is therefore, clear that the submissions with respect to
impermissibility of exportation of the product cannot be accepted. Bayer‟s
arguments are rejected.
Submissions in respect of the Canada Dispute
96. Bayer had relied on the Canada Dispute (supra) ruling by the WTO
DSP. Two important issues in that case involved questions of public policy
(societal public interest v. private rights). They were permissible exceptions,
under Articles 30 and 31 of TRIPS, to the use of patented products or
processes, without permission of the patent-owner (a patentee‟s rights are
detailed in Article 28.1 and 29), having regard to TRIPS principles in
Articles 7 and 8. The provisions of Canadian Patent Law- i.e. the regulatory
review exception and the stockpiling exception were challenged by the EU.
The Regulatory Review Exception, in Section 55.2(1) of Canada‟s patent
law, allows the generic industry without authorization, to develop the
product and submit it to regulatory authorities for market approval so that
they could market the product when the patent expires; no permission of the
patent owner was essential. The stockpiling exception in Section 55.2(2) of
Canada‟s law permitted generic manufacturers to produce and stockpile
(store) generic products for which marketing approval has been obtained,
during a six-month period before expiry of the patent, and market the generic
products as soon as the patent has expired. The first exception (regulatory or
research exception) to patent rights has been held legal, but the stockpiling
exception was held to be illegal.
97. Bayer‟s argument was that Canada‟s plea was that the reference to
"selling" the invention was necessitated by the fact that a generic drug
manufacturer had to usually purchase the active ingredient for its product
from a "fine chemical producer". Bayer relied upon footnote 49 on page 21
of the award, which reads as follows:
―In response to a question from the Panel, Canada explained
that, if the patentee claimed that a fine chemical manufacturer
was infringing the patent, i.e. was manufacturing fine chemicals
for purposes which were outside the exception, the patentee
would commence infringement litigation against the
manufacturer under Sections 54 and 55 of the Patent Act. The
manufacturer would then be obliged to prove that it would have
been reasonable, objectively, for a party in its position to
believe that the use made of its manufactured active
ingredients related to the development and submission of
information required by law. It would be common commercial
practice for the supply contract with the manufacturer to
specify the purposes for which the chemicals were being
manufactured and to provide an appropriate indemnity against
infringement liability. While the matter had not been decided in
the courts, the effect of the exception of Section 55.2(2) for the
fine chemical producer would appear to be that a third party
could acquire intermediate products, or ―inputs‖, such as the
bulk fine chemical constituting the active ingredient of a
generic drug, for manufacturer and storage during the last six
months of the patent term. In other words, both the third party
and manufacturer would appear to be covered by the
exception.‖
98. It was submitted that the DSP in its findings stated that "selling" in the
provision was under challenge. Para 7.4 of the award was also relied on; it
states that:
―The structure of the generic pharmaceutical industry
illustrates the actual operation of the regulatory review
exception. Production of generic pharmaceuticals often
involves a two-tier production arrangement. The firm that
assembles and markets the final generic product often does not
have the technological capacity/expertise or the commercial
motivation to produce the so called ―active ingredient‖ - the
chemical product that generates the desired medicinal effect.
The active ingredient is thus often manufactured by a
specialized producer of fine chemicals, and then sold to the
generic producer which assembles the active ingredient with
other agents to create the final product in a form that can be
used by the ultimate consumer. In such cases, both producers
must engage in conduct that, in the absence of a regulatory
review exception, would be potentially infringing, if they are to
satisfy the requirements of the regulatory review process - the
fine chemical producer in developing, making and selling the
necessary amounts of the active ingredient to the generic
producer, and the generic producer in combining the various
elements to make the final product and then demonstrating its
safety, stability and effectiveness by appropriate tests. The
regulatory review exception applies to these activities of both
producers.‖
99. In view of these submissions, Bayer argued that Parliament inserted
the term "selling" in Section 107A(a) with intent to exempt the activities of
the contract manufactures and any entity selling within the territory of India
for the purposes as contemplated under the said section.
100. Several countries, including India, Canada and the US have fashioned
their patent laws to carve out such an exception. The Canadian provision,
Section 55.2(1), which enabled use of a patented product for generation of
information to be submitted to regulatory authorities was the subject matter
of a complaint lodged by the US and Europe at the Dispute Settlement Body
of the WTO. It was contended that Section 55.2(1) violated TRIPS.
101. The DSP under TRIPS in the Canada dispute case (supra) discussed
the issue; it found that such a provision (i.e. Canada‟s regulatory exception)
was a "limited exception" within the meaning of Article 30 of TRIPS, and
that the size of production would not violate patent rights so long as it is
solely for regulatory purposes. The DSP flagged the purpose of use in its
award, relevant portions of which are extracted below:
―7.3 Because of the regulatory review exception's importance to
the pharmaceutical industry, the operation of the exception with
regard to new pharmaceuticals was explained in some detail by the
parties. Information supplied by Canada in the proceedings before
the Panel on the process of regulatory approval in Canada for
patented and generic drugs can be found in paragraphs 2.2 to 2.7
above and Annexes 3 and 4 to this Report. The information has not
been contested by the European Communities. Since patent
applications are generally filed as quickly as possible after the
invention has been made, actual marketing of the patented product
is frequently delayed for a certain period of time because time is
required for development of the product in commercial form, after
which additional time is required to complete the testing required
for government approval. According to the information supplied by
Canada, the process of development of the drug and regulatory
approval for new patented pharmaceuticals normally takes
approximately eight to 12 years. The long development and
approval process means that, for most patented pharmaceuticals,
the 20-year patent term results in an actual period of market
exclusivity of only some 12 to eight years. After a pharmaceutical
patent expires, it is common for other producers to enter the
market supplying copies of the patented product at lower prices.
These lower-priced copies, known as "generic" pharmaceuticals,
often constitute a large part of the supply of pharmaceuticals in
national markets. Generic pharmaceuticals must also comply with
the government approval process. According to Canada's
information, for generic producers the process of developing their
version of the drug and obtaining regulatory approval takes
approximately three to six-and-a-half years, with development
taking some two to four years and the regulatory process itself one
to two-and-a-half years. If none of the development process could
be performed during the term of the patent, generic producers
could be forced to wait the full three to six-and-a-half years after
the patent expires before being able to enter the market in
competition with the patent owner. To the extent that some
development activity might be permitted, consistently with Article
30 of the TRIPS Agreement, under other exceptions such as the
traditional exception for experimental use of the patented product,
the delay in entering the market would be correspondingly less.
The regulatory review exception in Section 55.2(1) would allow
generic producers to complete both development and regulatory
approval during the term of the patent, thus allowing them to enter
the market as soon as the patent expires.
7.4 The structure of the generic pharmaceutical industry
illustrates the actual operation of the regulatory review exception.
Production of generic pharmaceuticals often involves a two-tier
production arrangement. The firm that assembles and markets the
final generic product often does not have the technological
capacity/expertise or the commercial motivation to produce the so-
called "active ingredient" - the chemical product that generates the
desired medicinal effect. The active ingredient is thus often
manufactured by a specialized producer of fine chemicals, and
then sold to the generic producer which assembles the active
ingredient with other agents to create the final product in a form
that can be used by the ultimate consumer. In such cases, both
producers must engage in conduct that, in the absence of a
regulatory review exception, would be potentially infringing, if
they are to satisfy the requirements of the regulatory review
process - the fine chemical producer in developing, making and
selling the necessary amounts of the active ingredient to the
generic producer, and the generic producer in combining the
various elements to make the final product and then demonstrating
its safety, stability and effectiveness by appropriate tests. The
regulatory review exception applies to these activities of both
producers.
7.5 To qualify for exemption under Section 55.2(1), such
activities by either fine chemical producers or generic producers
must be "solely for uses reasonably related to the development and
submission of information required" by any law, Canadian or non-
Canadian, that "regulates the manufacture, construction, use or
sale of any product". In answer to a question from the Panel,
Canada stated that, although Canadian marketing regulations for
generic producers did not require production runs to demonstrate
the applicant's ability to maintain quality production in
commercial volumes373, the statute would allow either fine
chemical manufacturers or generic producers to undertake such
production runs if they were required by regulations in other
countries.‖
102. Later, in its decision, the DSP held as follows:
―7.45 In the Panel's view, however, Canada's regulatory review
exception is a "limited exception" within the meaning of TRIPS
Article 30. It is "limited" because of the narrow scope of its
curtailment of Article 28.1 rights. As long as the exception is
confined to conduct needed to comply with the requirements of the
regulatory approval process, the extent of the acts unauthorized by
the right holder that are permitted by it will be small and narrowly
bounded. Even though regulatory approval processes may require
substantial amounts of test production to demonstrate reliable
manufacturing, the patent owner's rights themselves are not
impaired any further by the size of such production runs, as long
as they are solely for regulatory purposes and no commercial use
is made of resulting final products.
7.46 The Panel found no basis for believing that activities seeking
product approvals under foreign regulatory procedures would be
any less subject to these limitations. There is no a priori basis to
assume that the requirements of foreign regulatory procedures will
require activities unrelated to legitimate objectives of product
quality and safety, nor has the EC provided any evidence to that
effect. Nor is there any reason to assume that Canadian law would
apply the exception in cases where foreign requirements clearly
had no regulatory purpose. Nor, finally, is there any reason to
assume that it will be any more difficult to enforce the
requirements of Canadian law when Canadian producers claim
exceptions under foreign procedures. With regard to the latter
point, the Panel concurred with Canada's point that the
government is not normally expected to regulate the actual
conduct of third parties in such cases. The enforcement of these
conditions, as with other enforcement of patent rights, occurs by
means of private infringement actions brought by the patent owner.
The patent owner merely has to prove that the challenged conduct
is inconsistent with the basic patent rights created by national law.
Once that initial case is made, the burden will be on the party
accused of infringement to prove its defence by establishing that its
conduct with respect to foreign regulatory procedures was in
compliance with the conditions of Section 55.2(1).
7.47 In reaching this conclusion, the Panel also considered
Canada's additional arguments that both the negotiating history of
Article 30 of the TRIPS Agreement and the subsequent practices of
certain WTO Member governments supported the view that Article
30 was understood to permit regulatory review exceptions similar
to Section 55.2(1). The Panel did not accord any weight to either
of those arguments, however, because there was no documented
evidence of the claimed negotiating understanding, and because
the subsequent acts by individual countries did not constitute
"practice in the application of the treaty which establishes the
agreement of the parties regarding its interpretation" within the
meaning of Article 31.3(b) of the Vienna Convention.
7.48 A final objection to the Panel's general conclusion remains to
be addressed. Although the point was raised only briefly in the
parties' legal arguments, the Panel was compelled to acknowledge
that the economic impact of the regulatory review exception could
be considerable. According to information supplied by Canada
itself, in the case of patented pharmaceutical products
approximately three to six-and-a-half years are required for
generic drug producers to develop and obtain regulatory approval
for their products. If there were no regulatory review exception
allowing competitors to apply for regulatory approval during the
term of the patent, therefore, the patent owner would be able to
extend its period of market exclusivity, de facto, for some part of
that three to six-and-half year period, depending on how much, if
any, of the development process could be performed during the
term of the patent under other exceptions, such as the scientific or
experimental use exception. The Panel believed it was necessary to
ask whether measures having such a significant impact on the
economic interests of patent owners could be called a "limited"
exception to patent rights.‖
103. This Court notices that the phraseology of the Canadian provision
(Section 55.2.1) is closely similar to Section 107A(a). Given this fact, the
DSP ruling assumes significance. It noticed that firms which ―assemble and
market the final generic product‖ oftentimes do not have technological
expertise or capacity to produce the active ingredient (the chemical product
that generates the desired medicinal effect or "API"). This API is produced
by a specialized manufacturer and sold to the generic producer. The latter
assembles the API with other agents and creates the final product in a form
that can be used by the ultimate consumer. The DSP stated that the conduct
of such generic manufacturer and the API producer‟s activities are covered
by the regulatory or research exception.
―7.5 To qualify for exemption under Section 55.2(1), such
activities by either fine chemical producers or generic producers
must be "solely for uses reasonably related to the development and
submission of information required" by any law, Canadian or non-
Canadian, that "regulates the manufacture, construction, use or
sale of any product". In answer to a question from the Panel,
Canada stated that, although Canadian marketing regulations for
generic producers did not require production runs to demonstrate
the applicant's ability to maintain quality production in
commercial volumes373, the statute would allow either fine
chemical manufacturers or generic producers to undertake such
production runs if they were required by regulations in other
countries.‖
104. The Panel‟s view on this aspect is clear and unambiguous:
―7.45 In the Panel's view, however, Canada's regulatory review
exception is a "limited exception" within the meaning of TRIPS
Article 30. It is "limited" because of the narrow scope of its
curtailment of Article 28.1 rights. As long as the exception is
confined to conduct needed to comply with the requirements of the
regulatory approval process, the extent of the acts unauthorized by
the right holder that are permitted by it will be small and narrowly
bounded. Even though regulatory approval processes may require
substantial amounts of test production to demonstrate reliable
manufacturing, the patent owner's rights themselves are not
impaired any further by the size of such production runs, as long
as they are solely for regulatory purposes and no commercial use
is made of resulting final products.
7.46 The Panel found no basis for believing that activities seeking
product approvals under foreign regulatory procedures would be
any less subject to these limitations. There is no a priori basis to
assume that the requirements of foreign regulatory procedures will
require activities unrelated to legitimate objectives of product
quality and safety, nor has the EC provided any evidence to that
effect. Nor is there any reason to assume that Canadian law would
apply the exception in cases where foreign requirements clearly
had no regulatory purpose. Nor, finally, is there any reason to
assume that it will be any more difficult to enforce the
requirements of Canadian law when Canadian producers claim
exceptions under foreign procedures.‖
105. It is clear, therefore, that neither the quantity used nor the place of
research and development or information (i.e. within the country granting
patent or on foreign soil) is per se conclusive that the claim to use the Bolar
or research exception has to be rejected. Instead, the conduct or action of the
individual or entity making, using, constructing or selling the patented
product or invention and the purpose for which it sought to be used (i.e. end
use and that it should not be commercial) would be important and decisive
whether the exporting or purchasing entity intends to use the patented
product for commercial purposes.
Tests necessary to regulate the use of the Section 107A exemption
106. This Court, in the previous parts of the present judgment, has
rejected Bayer‟s argument with respect to the interpretation of Section 107A.
Nevertheless, the court is also cognizant of the fact that export of patented
invention can potentially be troublesome to the patent owner; an unregulated
export activity can result in exploitation of the Bolar exemption beyond what
can be considered "reasonably" related to obtaining approval under laws of
India or another country. The wide nature of reliefs claimed by Bayer in the
writ petition, i.e direct seizure of export consignment, direction to customs
authorities to insist on labelling of products to facilitate their seizure and
other such reliefs, in the opinion of the court, cannot be granted in a writ
proceeding because whether the research provision has been invoked
correctly can be determined by an examination of facts and also seeking
expert opinion wherever needed. Equally, directing the executive to ensure
labelling of the products sought to be exported, cannot be the subject matter
of judicial review proceedings.
107. That brings the question to what is use, sale, etc "reasonably related"
for the purpose of developing information, ultimately used for in compliance
with regulatory processes and laws in or outside India? Ultimately, on this
aspect, there cannot be an ironclad rule or bright line as to what acts are
reasonably related to the use or sale of the product, with the object of using
the developed information to satisfy the regulations.
108. The Canada dispute case (supra) is a clear authority which instructs
that the volume of use, sale, construction, etc of a patented invention - or the
quantum is itself inconclusive on the issue. Some guidance is, however,
available in this regard by the UK Intellectual Property Office (UKIPO) and
Medicines and Healthcare products Regulatory Agency (MHRA). The
guidelines issued in this regard are extracted below:
―The carrying out of chemical and biological synthetic
processes suitable for the making, disposal or keeping of the
active substance(s) including the manufacture or the import of
batches in quantities sufficient to provide material for
preparing investigative batches of the medicinal product and to
validate the processes to the satisfaction of the competent
authorities.
The development, testing and use of the associated
analytical techniques for the above.
The development of the final pharmaceutical composition
and manufacturing processes for the medicinal product to be
marketed including the making, disposal or keeping or import
of product batches in quantities sufficient to conduct the
necessary pre-clinical tests, clinical and bioavailability trials
and stability studies of the medicinal product and to validate
the processes to the satisfaction of the competent authorities.
The development, testing and use of the associated
analytical techniques for the above.
The manufacture and supply to the competent authorities
of samples of active substances, their precursors, intermediates
or impurities and of finished product samples.
The compilation and submission of an MA or Variation
application and application for an MA.
(The acronym ―MA‖ refers to marketing approval of a
pharmaceutical product).
109. During end of 2012, the UKIPO consulted stakeholders on whether
the Act should be changed to include an exemption from patent infringement
for activities involved in preparing or running clinical or field trials which
use innovative drugs. The changes became effective from 01.12.2014. The
new guidelines are extracted below:
―obtaining or varying an authorisation to sell or supply,
or offer to sell or supply, a medicinal product (whether in
the United Kingdom or elsewhere);
complying with any regulatory requirement imposed
(whether in the United Kingdom or elsewhere) in relation
to such an authorisation
enabling a government or public authority (whether in the
United Kingdom or elsewhere), or a person (whether in the
United Kingdom or elsewhere) with functions of:
providing health care on behalf of such a
government or public authority, or
providing advice to, or on behalf of, such a
government or public authority about the provision
of health care, to carry out an assessment of
suitability of a medicinal product for human use for
the purpose of determining whether to use it, or
recommend its use, in the provision of health care.‖
110. Thus, the volume of the patented product and its use for research and
development of information cannot be prescribed by any one norm. Each
case merits an analysis of the evidence, the proof regarding the regulatory
concerns is to be based on it. At the same time, this cannot be short circuited
by approaching and seeking relief under Article 226 of the Constitution.
Bayer‟s claim that the court should have directed the authorities to seize or
prohibit quantities of articles which Natco, or someone else sought to export,
is not based on any obligation cast upon Customs authorities, in law. Further,
even for the court to issue blanket directions of the kind, sought by Bayer, in
its writ petition, is not feasible, because whether such seizure or prohibition
or labelling ought to be mandatory, are aspects to be worked out, at the
policy level, by the executive government, and not upon the court‟s
understanding. If Bayer‟s claim were to succeed on this score, not only
would the court become a proactive institution in framing policy and
evolving normative standards in respect of spheres that have public
repercussions, but would be exposed to the criticism that it would do so at
the interests of private parties; moreover the episodic nature of writ
jurisdiction is such that at the behest of a patent proprietor, sometimes even
on its apprehension, the court would be in effect legislating policy in the
guise of interpretation of law. Equally, the direction given for permission to
export, in the course of writ proceedings, (in Natco‟s case of howsoever
miniscule an amount of API) was inappropriate.
111. The approach of the learned single judge in permitting export, without
any inquiry and holding that export of 1000 or 2000 tablets constituted
reasonable use, in this case, cannot be countenanced. In such case, upon the
patent proprietor alleging the infringement was to institute legal proceedings
to injunct the alleged exporter or seller, it is equally possible for the seller or
exporter to seek a declaration or appropriate relief (including in a suit for
groundless threat, if such action lies) that its overseas sales are for research
and purposes covered by Section 107A. This Court is of the opinion that the
inquiry and adjudication in such cases would be in regard to the following:
(1) The patent granted;
(2) The nature of the product or elements sought to be exported;
(3) The details of the party or party importing the product,
(4) The quantity sought to be exported
(5) Other particulars with respect to the end use of the product, to
establish that it is solely for research and development of information to
regulatory authorities in the other country;
(6) All particulars regarding the relevant regulations, covering the kind
and scope of inquiry, including the quantities of the product (i.e the patented
product or compound, API or fine chemical needed). These details must be
supplied by the exporter/seller of the product to the overseas buyer. In case
the defendant is not the seller, it should disclose who had purchased the
product in the relevant quantities, to facilitate its impleadment in the
proceedings. In the event it cannot do so, the consequences of such result
ought to be considered by the court.
(7) If the regulations are in the language of that country, an authentic
English translation to facilitate a speedy resolution;
(8) Appropriate interim order, including undertaking by way of affidavit
to compensate the plaintiff, in the event the suit were to be decreed and the
extent of such monetary compensation. The affidavit should be of an
authorized personnel, and kept alive during the pendency of litigation, duly
authenticated by the board of director or other controlling body of the
defendant- and whenever the company or entity undergoes amalgamation or
transfer, suitable undertaking from the successor organization;
(9) If necessary, verification through the Indian mission (and its trade
division) abroad regarding the authentication of the third party and/ or its
facilities abroad.
(10) If it is held by the court that the exporter is not involved in sale or
export of any patented product, but a generic article, unprotected by patent
law, when denying relief, suitable restitutionary relief should be awarded to
the defendants in monetary terms, to preclude litigation that prevents trade or
competition.
The above aspects are only indicative of the matters that need
examination, they are in no way exhaustive and the court may consider any
other matter relevant to the subject.
Postscript
112. The TRIPS Agreement (1994) mentions in Article 7, as an objective,
the need to balance IP rights:
―The protection and enforcement of intellectual property rights
should contribute to the promotion of technological innovation
and to the transfer and dissemination of technology, [...] in a
manner conducive to a balance of rights and obligations.‖
113. The Doha Declaration- (i.e. the Declaration on the TRIPS Agreement
and Public Health, adopted on 14.11.2001) does not contain any express
mention of such need to strive for balance. It, however alludes, significantly
the role necessary through ―balanced rules "thereby recognizing the need
for all people to benefit from the increased opportunities and welfare gains
that intellectual property - as part of the multilateral trading system - can
generate. The 2005 Decision of the General Council on the amendment of
the TRIPS Agreement also impliedly flags the concern of balancing
humanitarian and development goals on the one hand, and right-holder
interests, on the other, in the public health field.
114. In the context of IP rights, the concept of balance was explained
eloquently in the dissenting opinion of Judge Kozinski in White v Samsung
Electronics America, Inc. 989 F.2d 1512 (Ninth Circuit, 1993) where he
stated:
―intellectual property law is full of careful balances between
what's set aside for the owner and what's left in the public
domain for the rest of us: The relatively short life of patents;
the longer, but finite, life of copyrights; copyright's idea
expression dichotomy; the fair use doctrine; the prohibition on
copyrighting facts; the compulsory license of television
broadcasts and musical compositions; federal preemption of
overbroad state intellectual property laws; the nominative use
doctrine in trademark law; the right to make soundalike
recordings. All of these diminish an intellectual property
owner's rights. All let the public use something created by
someone else. But all are necessary to maintain a free
environment in which creative genius can flourish.‖
115. The history of the Bolar provision highlights that the interest in
creativity and progress was not to be undermined by the seemingly wide
nature of patent rights; in the context of essential products such as drugs,
diagnostic aids, medical devices and other articles, the teachings in the
patent necessarily do not lead to its use by the public, upon their lapse to the
public domain. To fulfill drug acceptability standards prescribed by
regulatory authorities, further tests are to be conducted. The Roche v
Bolar decision elicited immediate Congressional response and the Hutch
Waxman Act was enacted, in effect, nullifying that decision. TRIPS
recognised the need for Bolar like research provisions, enabling research and
development in numerous ways which relieve those involved in such
activities, of the charge of patent infringement. Therefore, a constricted and
narrow textual interpretation of such provisions is not called for.
116. This court notes, furthermore, that as early as in 1946, the Constitution
of the World Health organization (WHO) recognized that the ―the enjoyment
of the highest attainable standard of health is one of the fundamental rights
of every human being without distinction of race, religion, political belief,
economic or social condition.‖ Later, the International Covenant on
Economic, Social and Cultural Rights, by Article 12 stated that:
―1. The States Parties to the present Covenant recognize the
right of everyone to the enjoyment of the highest attainable
standard of physical and mental health.
2. The steps to be taken by the States Parties to the present
Covenant to achieve the full realization of this right shall
include those necessary for:
(a)The provision for the reduction of the still birth rate and of
infant mortality and for the healthy development of the child;
(b) The improvement of all aspects of environmental and
industrial hygiene;
(c) The prevention, treatment and control of epidemic, endemic,
occupational and other diseases;
(d) The creation of conditions which would assure to all
medical service and medical attention in the event of sickness..‖
117. This Court is of the opinion that it is necessary for national courts to
be aware and cognizant of these obligations, even while considering the
assertion of property rights which it has to enforce. It is here that the
concerned national courts‟ constitutional ethos and the values embodied in it
also need consideration: whether they can be given primacy or not is to be
decided on a case to case, fact dependent basis. Article 47 of the Indian
Constitution obliges the State to ensure that the standards of public health of
all are ensured and maintained and policies are to be fashioned appropriately.
Article 21, which ensures the right to life and liberty, has been interpreted by
our Supreme Court as including certain guarantees to health care access.
Given these paradigms, an interpretation that furthers the objectives of
Section 107A (and the previous research enabling existing in the Patents Act,
i.e. Section 47) and Article 30 of TRIPS is to be preferred. This court has
added these as a postscript- rather than in the main body of its findings,-
inasmuch as these aspects too need to be discussed appropriately, in the
context of patent infringement claims, which generally tend to be confined in
the "silo" of assertion and negation of private rights and their enforcement,
despite (at times) larger implications to the general public in terms of
outcomes.
Conclusions
"Each generation stands on the shoulders of those who have
gone before them, just as I did as a young PhD student in
Cambridge, inspired by the work of Isaac Newton, James Clerk
Maxwell and Albert Einstein.‖
Stephen Hawking
118. The Bolar exemption is the global community‟s thought out design to
ensure that the enclosure of intellectual property rights, granted to
inventions, does not last beyond the term assured and that the general public
is afforded with the end of the bargain which every society guarantees while
sealing a patent i.e. access to the technology or invention for generations to
come. But for a Bolar exemption, a third party manufacturer would not be
able to start experimentation and ready a product, for its availability to the
general public after the expiry of the patent term.
119. In the light of the above discussion and findings, it is held and directed
as follows:
(a) Sale, use, construction of patented products (by individuals and
entities that do not hold patents) in terms of Section 107A of the Act for
purposes both within the country and abroad is authorized and legal provided
the seller ensures that the end use and purpose of sale/export is reasonably
related to research and development of information in compliance with
regulations or laws of India (or the importing country), for its submission in
accordance with such laws. The impugned judgment of the learned single
judge and the findings recorded on this aspect are accordingly affirmed.
(b) A dispute about the sale, i.e. whether it is legitimately related to the
reasonable end use or purpose of research etc. for submission of information
is properly the subject matter of a civil suit in which the full range of reliefs
available in law can be granted having regard to the circumstances and the
evidence led;
(c) The court trying the suit would suitably take into account the factors
that need to be examined (which are elaborated in the previous part of this
judgment) and other relevant factors;
(d) Such disputes are not ordinarily the subject of public law proceedings,
as they involve investigation into facts and also result in reliefs to private
parties for enforcement of private property entitlements. Therefore, such
disputes should not be the subject matter of writ proceedings; petitions under
Article 226 of the Constitution of India should not be entertained and
wherever filed, the parties should be relegated to civil remedies.
(e) CS(OS) No.1090/2011- subsequently renumbered as CS(Comm)
33/2017 (Bayer‟s suit against Natco) is pending. Issues were framed in the
said suit, on 09.01.2017. In these circumstances, no separate orders are
called for.
(f) CS(OS) (Comm) 1592/2016 filed by Bayer against Alembic is
restored to the file of this Court. The concerned learned single judge would
proceed to try it.
(g) Both the above suits shall be decided in accordance with law, keeping
in mind the discussion in this judgment and the factors indicated above.
120. For the above reasons, the letters patent appeal has to fail; LPA
359/2017 is dismissed, subject to the observations in this judgment.
RFA(OS)(Comm) 6/2017 is for the reasons indicated above and subject to
the directions, allowed. In the peculiar circumstances of the case, there shall
be no order on costs.
S. RAVINDRA BHAT
(JUDGE)
SANJEEV SACHDEVA
(JUDGE)
APRIL 22, 2019
