India's First Grant of Compulsory Licence

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India’s first compulsory licence has been granted by the Indian Patent Office to Hyderabad-based drug-maker, Natco. The compulsory licence allows Natco to manufacture the active ingredient as protected by Bayer’s patent on Sorafenib Tosylate, IN 215758 (granted in 2008).

Bayer’s drug Nexavar, containing active ingredient, Sorafenib Tosylate, was first launched in 2005 for the treatment of Kidney Cancer which, later, in 2007, also received approval for the treatment of Liver cancer. Nexavar, although is not a life saving drug, has shown to extend life of a patient for around 4-5 years in kidney cancer and around 6-8 months in liver cancer.

Bayer had received the approval for importing and marketing the drug in India in 2008 and had always been marketing the drug in India by importing the drug. Natco received DCGI licence to market the drug in India, in April 2011. Subsequent to Natco receiving DCGI licence, Natco had approached Bayer to seek a voluntary licence for manufacturing and marketing the drug in India. Natco’s request for voluntary licence never materialized, following which Natco filed for a compulsory licence in July 2011.

LANDMARK JUDGMENT

The 62-page judgment by the Controller of Patents (Mr. P.H. Kurian), under the amended Indian Patents Act (2005), allows Natco to make and sell a similar version of Bayer's Nexavar in India. The judgment reasoned that the patent-holder, Bayer, had not met the reasonable requirement of the public. It had not “worked the patent” or manufactured it to a reasonable extent in India. Also, the drug was not available at an affordable price. With the compulsory licence granted, Natco will have to pay Bayer a royalty fixed at six per cent of net sales, every quarter.  The order also makes it obligatory for Natco to supply the drug free of cost to at least 600 needy patients per year.

COMPULSORY LICENCE

A compulsory licence is an authorization granted by the government in accordance with the grounds described under section 84 of the Indian Patent Act, 1970.

Section 84(1) of the Indian Patent’s Act allows any interested person to make an application to the Controller for grant of compulsory licence on a patent after the termination of three years from the date of grant of the patent on any of the following grounds:

(a) that the reasonable requirements of 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

(c) that the patented invention is not worked in the territory of India.

REASONING BY THE CONTROLLER

The Controller gave his reasoning separately on each of the above grounds and concluded that all the grounds are satisfied in granting a compulsory Licence against Bayer. Following are the reasoning cited by the controller:

84 (1) (a): Reasonable requirements of public are not satisfied

Controller noted that the drug is available to little above 2% of the eligible patients in India and thus reasonable requirements of the public are not satisfied. One of the reasons given by Bayer for lesser sales of the patented drug by Bayer in India was that Cipla makes a similar infringing drug for Indian market at a lesser price. However, The Controller did not take this into consideration saying that the demand in the market for the patented drug has to be fulfilled by the patentee and not a third party. The Controller stressed on the fact that Form 27 (Working of invention statement) filed by Bayer in 2009 and 2010, show only an insignificant quantum (only Rs. 2 Crore for 2009) of possible sales for the eligible patients.

84 (1) (b): Non-availability at reasonably affordable price

The drug by Bayer has to be taken by the patient throughout his lifetime and the cost of therapy is Rs. 2,80,428/- per month and Rs. 33,65,136/- per year. The applicant submitted that the price of the patented product is too high and simply not affordable by common man making the product inaccessible and out of reach. The applicant further said that it is an abuse of monopolistic rights and such a practice is unfair and anti-competitive.  The patentee argued that the price includes the R&D costs as well as it pays for the pipeline (for future innovation). Also, “reasonableness” is a relative term which needs to be interpreted as per circumstances. “Reasonably” should mean reasonable to the ‘patients’ and ‘patentee’ as well. The Controller after going through all evidences said, “I am of the view that reasonably affordable price has to be construed predominantly with reference to the public… I conclude beyond doubt that the patented invention was not available to public at a reasonably affordable price and that Section 84(1)(b) of The Patent Act, 1970 is invoked in this case”

84 (1) (c): Non-working in the territory of India

The Controller after consulting the international agreements on intellectual property including TRIPS,

Paris convention and the Indian Patent Act, concluded that Bayer failed to work on the patent in the territory of India. He further said, “In the instant case, the Patent was granted in the year 2008. It is an admitted fact that the Patentee does have manufacturing facilities for manufacturing drugs in India, including oncology drugs. However even after the lapse of four years from the date of grant of patent, the Patentee failed to do so. The Patentee has also failed to grant a voluntary licence on reasonable terms to anyone including the Applicant herein to work the invention within the territory of India. Accordingly, I hold that Section 84(1)(c) is attracted in this case..”

ORDER

The Controller granted a compulsory licence under Section 84 of Indian Patent Act, 1970 to M/s Natco Pharma Ltd., Hyderabad for Bayer’s Patent IN215758 on 9th of March 2012. Natco’s compulsory licence would make the drug available to public at a much reduced price. The drug which costs patients around Rs. 2.8 Lakhs/ month through Bayer, would now be available to public at just around Rs. 8800/month.

IMPACT

This grant of compulsory licence will trigger other companies to file their applications against patented products of MNCs in same lines. Also, this decision may make the MNCs to consider the differential pricing structure for selling drugs for different (rich/intermediate/poor) segments of people in India. This decision will definitely have positive impacts on the patients suffering from kidney and liver cancers in India, who were not able to afford high treatment cost previously.

Incidentally, this was Mr. Kurian’s last assignment. He has now handed over the charge of The Controller at Patent Office to Mr. Chaitanya Prasad.