We had blogged on this application earlier here, setting out the text of section 92A and the various legal issues involved with this compulsory licensing application.
“The government is to consider whether or not it should allow its drugs companies to manufacture patented medicines for export to poor countries at a hearing scheduled in the Delhi Patent Office late next week.
Hyderabad-based Natco Pharma has requested compulsory licences overriding patents owned by the Swiss company Roche on erlotinib and the U.S. company Pfizer on sunitinib — both are anti-cancer drugs. If the government agrees, it will be the second time an export licence has been granted for public health reasons since WTO members agreed on the trade provision in August 2003. The first was issued by Canada for the production of an HIV/AIDS drug for export to Rwanda.
“The Nepal government issued us an import licence and based on that we applied,” M. Adinarayana told The Hindu on Saturday. Natco, which intends to produce 30,000 tablets of erlotinib and 15,000 of sunitinib, has offered the patent holders a 5 per cent royalty, in line with the WTO requirement to provide remuneration.”
In order to appreciate the various legal niceties involved in this dispute, we reproduce the text of section 92A:
“(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.”
Since Nepal is an LDC with time till 2106 to implement product patents in pharmaceuticals, Natco need not worry about procuring a compulsory license from the Nepal government. Indeed, in the light of the fact that there is no patent covering either Erlotinib or Sunitinib in Nepal, one may wonder why Natco needs a license at all. Can it not freely export these drugs to Nepal?
Not so, since the Indian patents act provides a patentee with many exclusive rights, including the right to manfuacture, sell, import etc. In order for Natco to export to Nepal, it has to first manufacture the product–an act that violates one of the exclusive rights of a patentee. Hence, Natco has to make their case fall within the exceptional circumstances carved out by section 92A.
Under section 92A, although Natco does not need a compulsory license issued in Nepal, it still requires issue a notification permitting the importation of patented products from India. From the Hindu article above, it appears that the Nepal government has done so. But one is not certain of the terms of this “import” license. Is this clearance sufficient to comply with the requirements of the 2003 Decision (para 2 (a)), which provides that:
“the eligible importing Member has made a notification to the Council for TRIPS specifying “the names and expected quantities of the product(s) needed”.
We’ve checked the TRIPS website again and there is no notification from Nepal to this effect. The only notification till date is that of Rwanda, which states:
“Based on Rwanda’s present evaluation of its public health needs, we expect to import during the next two years 260,000 packs of TriAvir, a fixed-dose combination product of Zidovudine, Lamivudine and Nevirapine (hereinafter referred to as the “Product”) manufactured in Canada by Apotex, Inc. However, because it is not possible to predict with certainty the extent of the country’s public health needs, we reserve the right to modify the foregoing estimate as necessary or appropriate.”
Natco should take steps to ensure that the Nepalese government puts up such a notificaiton soon.
The Hindu article states that the patent office will hear the patentee before taking a decision on whether to grant a license, a step which the article notes is “unusual”! It cites Adi Narayana, a representative of Natco in this regard:
“The Patent office has done something unusual, Adi Narayana explains. For compulsory licenses, the government is empowered to take decisions based on the strength of the application alone.
“I intend to ask the patent office why it is allowing representation from the patent holder,” he said.
Contrary to what Mr Narayana suggests, most compulsory licenses are decided after hearing the patentee-so really, there is nothing “unusual” about this. However, from a strict reading of the patents act, the government is not obliged to offer the patentee a hearing. For regular compulsory licenses under the patents act, section 87 mandates such a hearing of both the parties. However, there is no similar section offering such a possibility in the case of a section 92A “Doha style” application. From this, one might argue that the patentee ought not to be heard under section 92A.
However, this omission appears more an oversight than a deliberate intent to exclude the views of a patentee in deciding a section 92A application. Readers will recollect our earlier comment in relation to whether or not the patentee ought to be remunerated under section 92A. We reproduce this portion from our previous post below:
“Interestingly, the above section does not speak of royalties, but leaves it upto the Controller to fix “terms and conditions”. Can the Controller issue such a license without any royalties to Roche? Clearly not, since Clause 3 of the 2003 Decision states that “adequate” remuneration (pursuant to Art 31 [h] of TRIPS) has to be paid to the patentee.”
It seems reasonable that a patentee should be offered a hearing, before the government determines what royalty is reasonable under the circumstances.
Readers will recollect that SpicyIP decried the grant of a patent without hearing the parties in the Valcyte case. The same sort of considerations ought to prevail here too i.e. in the interests of transparency and having a government authority make the right decision, we have to ensure that both parties are heard–particularly since this is the first case under section 92A.
Hi Shamnad,
“However, this omission appears more an oversight than a deliberate intent to exclude the views of a patentee in deciding a section 92A application.”
Although still in its draft form and therefore subject to review/change, The Indian Patent Office Practice Manual on pages 96 and 97 explicitly states that CLs under s92(A) are to be granted immediately provided the relevant paperwork is in order. Page 97 shows a flow diagram of the various procedures involved in the different CLs, and you will see under s92(A) there is no opposition procedure/hearing (unlike for CLs under s92(1) or s84). So I wonder if this is an oversight. Plus you may note that there doesnt appear to be a opposition/hearing procedure for CLs under s92(3) i.e where the Indian Govt issues a CL in national emergency/public non-commercial use for re public health crises.
I was also looking at s21.01 of the Canadian Patent Act and the use of patents for International Humanitarian Purposes (i.e Jean Chretien’s pledge). As far as I can see from the conditions for granting authorisation set out in s21.04, there is no procedure of a hearing involving the patentee. That said the applicant has a laundry list of conditions to meet , including a declaration that the applicant sought a licence to manufacture the product from the patentee.
So its not clear-cut that countries who have imported Doha into their laws have to give the patentee a hearing/opposition right. I think the protection for the patentee lies in the applicant meeting the laundry list of requirements.
Cheers
Tahir Amin (www.i-mak.org)
Just to add to the last comment, if there is an oversight in the law/procedure, it’s with regard to determining the royalty (as you have mentioned).
Again, I dont see anything in the Canadian Act that sets out a hearing between the parties to determine the royalty issue – though it might be in the implementing rules, which I havent got access to.
Tahir (www.i-mak.org)
Dear Tahir,
Thanks for the excellent comments. As you have rightly noted, there is an oversight with regard to payment of “royalty” under section 92A. And this hasn’t been addressed in the manual as well–so I have my reservations in taking the manual to be indicative of the fact that this is a well thought through and fool proof provision. Besides, both of us know that the patent office manual is far from good and contains a number of inaccuracies.
And if “royalty” is to be paid, then it makes sense to hear the patentee. The 2003 implementation decision notes that “royalty” shall be paid in accordance with Art 31 (h), which in turn stipulates that the “the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization”. I can’t understand how anyone can come up with a “fair” royalty percentage based on “economic value” etc without hearing the patentee or at least permitting them a representation.
And, as you can appreciate, section 92(3) does not provide for the payment of any royalties–and therefore it may make sense to not offer any possibility of opposition/representation here. But section 92 A which clearly provides for a royalty to be paid is different in that respect.
From a policy perspective, I don’t see why India should not grant such an avenue for representation/hearing–what militates against this–the fact that Canadians didn’t think it fit enough to grant such a possibility? (assuming that is indeed the case).
Hi Shamnad,
The Patent Office Manual is, of course subject to review/changes/errors, but I wonder whether it was an oversight and not deliberate – with the Indian Patent Office we’ll never know unless we have transparent patent office practice notes/policy available via its website.
On the royalty point/”adequate remuneration” and whether anyone can come up with a fair royalty percentage on an economic value, I understand that Canadian law has a formula for calculating in advance the specific royalty rate – linking the royalty payable to the UN’s Human Development Index (HDI). According to this formula the maximum royalty payable is 4% of the total value of the product to be exported.The figure could be lower depending on a countries HDI. That said there is provision for the Federal Court to set a greater royalty rate if satisfied the remuneration under the formula above is not adequate – taking into account the humanitarian/non-commercial reasons and economic value of the use of invention.
I think the reason not to grant a hearing is to quicken the procedure – which is already delayed by the long list of requirements under the Doha.
Im not sure it is correct that s92(3) does not intend to provide for any royalty payment to the patentee – what would be the basis for this compared to say Govt Use provisions (s99/100) which also call for a adequate remuneration? I think s92(3) just gives the Controller the right to waive the s87 procedure, but not a royalty. I think we have the same procedural question marks/gaps as for s92(A).
Cheers
Tahir (www.i-mak.org)
Hi Tahir,
“with the Indian Patent Office we’ll never know unless we have transparent patent office practice notes/policy available via its website. “
I think we’ll have to gauge this more from the statute/parli intent more than the patent office manual or the intent of the patent office.
“On the royalty point/”adequate remuneration” and whether anyone can come up with a fair royalty percentage on an economic value, I understand that Canadian law has a formula for calculating in advance the specific royalty rate”
No such formula in India–which makes it all the more important that parties be heard/provided with the opportunity to be represented in some way. and which is why what prevails in canada may not make sense in India.
“I think the reason not to grant a hearing is to quicken the procedure – which is already delayed by the long list of requirements under the Doha”
It seems like you’re advocating two wrongs to make something right here. If this is a provision that is being operated upon for the first time, absent guidelines, I think it’s critical that parties be heard. Unless they come up with a set formula for determining royalty. Quite clearly, we need amendments/guidelines here to ensure two things: that the process is quicker and that royalty is clearly spelt out.
Also, if you grant such a license that is based on not so fixed criteria under the act (royalty rates) without hearing the parties, you run into consti/admin law problems in India (audi alteram partem).
“m not sure it is correct that s92(3) does not intend to provide for any royalty payment to the patentee “
You’re right about this. An “oversight” from my end:). however, this section is clearly geared towards emergencies. 92A envisages both emergencies and non emergencies–in fact, in the case at hand, am not sure that non availability of sutent/erlotinib would qualify as an emergency. so quite clearly, we cannot treat this on par with section 92 (3). all the same, we may need to dispense with formalities in cases of real emergencies. and further amendments/guidelines would be the best way to go forward on this.
on the balance, with the statute as it stands now, there is nothing stopping the controller from “hearing” the party. And there is no strong legislative intent emerging that suggests that hearing wasn’t meant to be–in the same way that an omission on royalty rates doesnt suggest that royalty wasn’t meant to be. And given that this is not really an emergency and a patent office is faced with a doha style CL determination for the first time, I think it’s perfectly reasonable that the patentee is offered a hearing…
Hi Shamnad,
I think we both agree that the bottom line is that s92(A) (and s92(3) needs clearer procedural guidleines – whether we agree that includes a hearing/not, fixing a royalty formula and to prevent abuse of the provision.
Im sure we can have endless discussion on the stautory intent of s92(A)/Doha and what amounts or qualifies as a public health problems :). What I will mention is how effective will s92(A) be if it gets caught up in potentially protracted legal hearings, noting that there are rights of appeal (under s117A) against decisions made under s92 – assuming that NATCO would even take that option if refused the CL or told to paye a high royalty? Could be a long time before someone like Nepal gets the drugs it may legitimately need, if at all.
Cheers
Tahir
Absolutely Tahir,
I think after we’ve had the first couple of cases, there will be enough material on which to decide a royalty formula etc–and to build this into statute to prevent delays. Until that time, the patent office must gather all the evidence it can to arrive at fair determinations–which is why a hearing is essential. With more cases, more loopholes that exacerbate delays will emerge–and those will need to be plugged. But the mere threat of a delay at this stage ought not to drive us to not hear a party, when a provision with an indeterminate clause is being decided for the first time. As I mentioned earlier, you could run into problems iwth consti/admin law here.
Also, I wouldnt equate “public health” issue with an “emergency” envisaged under 92 (3)–while non availability of sutent at affordable prices may constitute a public health issue, it need not necessarily constitute an emergency…