Parallel Imports: Bangladesh as a New Business Opportunity for Indian Generics?


In a very incisive post, Mrinalini spoke about the scope of Section 107A of the Indian Patents Act, a provision dealing with the tricky issue of “parallel imports”. Does this provision present yet another business opportunity for our home grown generic companies? How does this implicate the mandate to grant the patentee an “exclusive right to import” under TRIPS?

I had discussed some of these issues with Joe C Mathew of the Business Standard some weeks back. Owing to a hectic travel schedule, I could not cover this earlier. Here are some excerpts from Joe’s piece:

“Domestic drug firms, which lost the opportunity to sell cheap versions of patented medicines after changes in the Indian patent law three years ago, may find the going good in Bangladesh.

Chances of technical partnerships in Bangladesh have brightened after it changed its patent law in an attempt to become a hub for manufacturing cheap copies of patent-protected medicines. The World Trade Organisation allows such medicines to be produced in least developed countries till 2016.

“This presents an exciting opportunity for the Indian companies. Since the passage of the 2005 Act, a number of companies have been concerned that their old business model of relying purely on generic sales cannot work as well. However, given that Bangladesh has a robust pharmaceutical base, they may think of setting up some of their operations there,” Shamnad Basheer, research associate, Oxford intellectual property (IP) Research Center, UK, said.

According to Bashir, the provisions for “parallel imports” in the Indian Patent Act allow import of medicines from any destination if the exporter of such a patent product is duly authorised under the law (of that country) to produce, sell or distribute the product. In other words, drugs manufacturers in Bangladesh could also use this to tap the market in India.

Nazmul Ahsan, general secretary, Bangladesh Association of Pharmaceutical Industry (BAPI), agrees.”

I am also including some quick notes that I had prepared for the interview with Joe below:

1. The Daily Star reported recently that Bangladesh amended its patent regime to remove pharma patents altogether!! It notes in particular that:

“A circular issued by the Department of Patent, Design and Trademarks in January said as per the TRIPS agreement all applications for patents of medicines and agricultural chemicals will be kept suspended until January 01, 2016. It said the previous applications as well as fresh applications relating to patents for medicines and agricultural chemicals will be preserved in a ‘mail box’ and will be considered after the expiry of the deadline.”

Although Bangladesh is an extremely poor country and qualifies under the UN as a least developed country, it has been granting pharmaceutical patents since 1911!

India on the other hand, cleverly removed pharma patents in the 1970’s. As most of us know, this policy regime was largely responsible for the creation and stunning growth of india’s generic pharma industry. Even after the signing of TRIPS in 1995, India did not immediately introduce pharma product patents. Rather, since it was a developing country, it availed of the 10 year window under TRIPS (unlike Brazil). It was only in 2005 that India finally changed its patent regime to grant pharma product patents.

Bangladesh, on the other hand, continued to grant pharma patents, although it was an LDC (least developed country) and entitled to a window upto the year 2016. The Bangladeshi government has now decided to follow in the footsteps of India and has now amended the patent regime to do what India did in 1970: i.e. remove pharma product patents! Of course, this is only till 2016—but that’s another good 9 years….

This presents a business opportunity for Indian companies. Since the passing of the 2005 act, a number of them have been concerned that their old business model of relying purely on generic sales cannot work as well. However, given that Bangladesh has a robust pharmaceutical base, they could think of setting up some of their operations there. And since there will be no longer be any pharma patents in Bangladesh, they can manufacture in Bangladesh without getting sued.

As of now, Bangladeshi companies are very strong in formulations—but it’s only a matter of time before they gain proficiency in API’s as well. By setting up base in Bangladesh, Indian companies could help Bangladesh industry acquire the skills necessary to make API’s. If things work well, the Bangladeshi industry coulds become as storng as the Indian industry and begin competing in the generic markets such as the EU and US.

Apart from the industrial benefits for Indian companies and for Bangladesh in general, MSF and other NGO’s fighting for greater access to affordable medication will be happy with this development. India was, till recently, the hub for manufacture of affordable generics. Many worried that with India shifting to a product patent regime in 2005, the generic supplies to poor countries like Africa would dry up. Given the recent change in patent law in Bangladesh, Bangladesh could become the next hub of generic drug manufacture.

What is interesting in this whole debate is that Indian companies could exploit a provision in the Indian patent act to supply even the Indian market with affordable drugs. Lets take the example of Tarceva, an anticancer drug, which is under litigation before the Delhi High Court. CIPLA claims that the drug is sold at very expensive rates in India and that this is a public health problem. If CIPLA is injuncted (at the final stage) by the Delhi High court and cannot sell in India, it could cleverly relocate its operations to Bangladesh and begin exporting the drug out to India. This way, Indian consumers could avail of this cheap drug. You may ask: will this “import” into India not constitute a patent infringement under the Indian patent Act. No—a careful reading of India’s patent act will show that this is not the case:

Before the 2005 amendments to India’s patent act, section 107A (b) provided that it was not an infringement to import a patented product, provided such import was from an exporter, who was ‘duly authorised by the patentee to sell or distribute the product’. In other words, under the old regime, unless CIPLA obtained permission from Roche, it could not import Tarceva into India.

The 2005 Act however very cleverly amended section 107A(b). Under the new provision, CIPLA can import Tarceva even without the permission of Roche.

The new Section 107A(b) dispenses with the authorisation required from the patentee – it only now ony requires that the exporter of such patented product (i.e CIPLA or its partner in Bangladesh) be “duly authorised under the law to produce and sell or distribute the product”. “Duly authorized under the law” is very different from “duly authorsied by the patentee”.

Illustratively, a simple authorization from the drug controller authority in Bangladesh will qualify CIPLA or its partner as “duly authorized” under Bangladeshi law. 
It does not need to separately get permission from the patent owner.

In short, under the present Indian patent act (section 107A(b)), CIPLA could set up base in Bangladesh to manufacture and export medicines to India. If there is no patent in Bangladesh covering Tarceva, then CIPLA could manufacture Tarceva (either by itself or through a partner) and export such drugs to India. And this would be perfectly legal under section 107A(b).

The question is: will Indian companies exploit this opportunity? More importantly, if they use this provision, will the MNC’s ask their home governments to drag India to the WTO for a violation of TRIPS. It is not clear if this provision (107A(b) is in compliance with TRIPS. I deal with this issue in a paper of mine published in the Indian Journal of Law and Technology in 2005. I extract some of the portions below (with some additions)…

“In essence, Art 28 of TRIPS states that a patent shall confer on its owner the exclusive right to “prevent third parties not having the owner’s consent from the acts of making, using, offering for sale, selling, or importing” a patented product.

The footnote to the word “import” in this Article states that: “This right, like all other rights conferred under this Agreement in respect of the use, sale, importation or other distribution of goods, is subject to the provisions of Article 6.”

Article 6 of TRIPS states, in pertinent part, that “…nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights”.

The meaning of Article 6 is made clear by Article 5(d) of the Doha Declaration which states: “The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each member free to establish its own regime for such exhaustion without challenge …”

However, the above hypothetical example of an Indian company setting up base in Bangladesh does not involve an ‘exhaustion’. There is no first sale of the patented drug by the patentee – rather the drug is manufactured and then exported by a third party. In short, the very essence of an exclusive right to “import” mandated under Article 28 of TRIPS is affected. Consequently, the parallel import provision in India (section 107 A (b)) be seen to violate Article 28 of TRIPS.”

It also bears noting that section 48 of the Indian Patents Act requires that the exclusive right to “import” of a patentee be protected. And section 107 A (b) hits at the very essence of this right. If this ends up being litigated before an Indian court, a judge may perhaps construe section 107 A (b) and section 48 harmoniously to require a patentee’s permission before exporting patented drugs manufactured by 3rd party from Bangladesh to India. But then, such an interpretation will run the risk of rendering the amendment to section 107A redundant. The judge reaches a result similar to what prevailed under the earlier section 107A–i.e. it was not an infringement to import a patented product, provided such import was from an exporter, who was ‘duly authorised by the patentee to sell or distribute the product’.

Perhaps some of our readers might have insights into how we ought to resolve this interpretative conundrum. This provision is certain likely to trigger off some legal battles and spicy posts in the months ahead.

Shamnad Basheer

Shamnad Basheer

Prof (Dr) Shamnad Basheer founded SpicyIP in 2005. He is currently the Honorary Research Chair of IP Law at Nirma University and a visiting professor of law at the National Law School (NLS), Bangalore. He is also the Founder of IDIA, a project to train underprivileged students for admissions to the leading law schools. He served for two years as an expert on the IP global advisory council (GAC) of the World Economic Forum (WEF). In 2015, he received the Infosys Prize in Humanities in 2015 for his work on legal education and on democratising the discourse around intellectual property law and policy. The jury was headed by Nobel laureate, Prof Amartya Sen. Professional History: After graduating from the NLS, Bangalore Professor Basheer joinedAnand and Anand, one of India’s leading IP firms. He went on to head their telecommunication and technology practice and was rated by the IFLR as a leading technology lawyer. He left for the University of Oxford to pursue post-graduate studies, completing the BCL, MPhil and DPhil as a Wellcome Trust scholar. His first academic appointment was at the George Washington University Law School, where he served as the Frank H Marks Visiting Associate Professor of IP Law. He then relocated to India in 2008 to take up the MHRD Chaired Professorship in IP Law at WB NUJS, a leading Indian law school. Prof Basheer has published widely and his articles have won awards, including those instituted by ATRIP and the Stanford Technology Law Review. He is consulted widely by the government, industry, international organisations and civil society on a variety of IP issues. He also serves on several government committees.

36 comments.

  1. AvatarAnonymous

    Shamnad,
    a) I believe that Sun already has facility, albiet small, in Bangladesh.
    b) The crux of your article lies in the last 2 paragraphs. I still think that S.48 would stop imports from LDCs under the guise of exemption vide S. 107A.
    Note that the section requires import ‘from a person who is duly authorised under the law to produce and sell of distribute the product’.
    So, that does not seem to me, to allow a reading that merely an authorisation from BD drug authorities could allow importation into India.

    A friend/ regular reader.

    Reply
  2. AvatarShamnad Basheer

    Dear Anonymous,

    Thanks for your comment. You’ve raised an important point.

    Firstly, one would need to seek an indian drug regulatory approval, whether or not there is a patent. In other words, patent or no patent and irrespective of what section 107A(b) states, you cannot sell the drug in india without regulatory approval. Which is why i took this to be a given…

    But more importantly, why do you assume that such regulatory approval should pose a problem in India. There is no requirement for a patent-regulatory linkage under Indian law. and if there is no such requirement, and Ranbaxy or Sun gets such an approval from both Bangladesh and India, then it would seem that under a plain reading of section 107A(b), they are covered.

    Reply
  3. AvatarAnonymous

    wouldnt regulatory approval for purpose of importation of a patented drug mean either approval from the patentee or issuance of a compulsory license?

    Reply
  4. AvatarShamnad Basheer

    Not at all,

    These are two different concepts altogether.And the patent office is a different institution from the office of the drug controller. Pfizer may get a patent on a new drug molecule, but it cannot sell the drug unless it has “regulatory approval” from the drug regulator. A patent merely confirms that the drug (or early stage molecule) is new, inventive and useful. The drug regulator confirms (on the basis of clinical trial information etc) that the drug is safe and effective for patients.

    Reply
  5. AvatarAnonymous

    I am really sorry for mixing up things. Regulatory approval would mean approval from drug regulatory authorities. my query was wrongly worded. What i meant to ask was:

    in S.107A(b) when it says:
    “who is duly authorised under the law to produce and sell or distribute the product” – shouldnt the authorization under S.107A(b)be from either the patentee or an authorization under a compulsory license sort of situation? Are there other situations too where it shall be considered to be duly authorised under the law to produce and sell or distribute the product as under s.107A(b)?

    Reply
  6. AvatarShamnad Basheer

    Aaahh..

    But that precisely is the question that we’re seeking to solve here. If the term “who is duly authorised under the law to produce and sell or distribute the product” meant permission from the patentee, then how is it any different from the earlier version of section 107(A). The change then is redundant? More importantly, statutes have to be first interpreted in accordance with their plain English meaning. And the plain meaning of “authorised under the law” is very different from “permission of patentee”.

    And when you say “compulsory license”, do you mean one in Bangladesh or in India or both. If in both, we don’t need the parallel import provision at all–as the CL itself would cover this. The same is the case if Ranbaxy gets a CL only in India–this would suffice to permit it to sell in India (without having to go through section 107).

    Lastly, if it is a CL In Bangladesh that you are speaking about, then logically, you also have to accept the argument that absent a patent in Bangladesh (and the need for a CL), the importer does not need any permission from the patentee at all!

    Reply
  7. AvatarAnonymous

    When i say compulsory license i meant one issued in India. A person can be a person authorized by the Controller(or the Gov. of India) if he has a CL. And he can then authorize someone in Bangladesh to manufacture etc. under S.107A(b).

    With all due respect I do not agree that S.107A(b) would include the Bangladesh Drug Authority to be a person duly authorized under Indian law for purposes of importing a patented product in India. And considering that such an argument is put forward the Court should not interpret it in this manner. I dont know if these can be help me but do consider the following:
    1. S.107A(a) uses the language “..for uses reasonalby 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”
    If S.107A(b) was to include a person authorized under Bangladeshi law it would have made the distinction as in S.107A(a)[am I over-reading???]
    2. It would be safer (for TRIPS purposes)to assume that the import is from a person authorized under Indian law(like a patentee or a CL holder).
    3. Wouldnt the parallel import provision still be in place in the case the patentee authorizes a person in India and the person authorizes another person in Bangladesh to manufacture sell and distribute in India. Such manufacture shall not be considered infringement.
    4. If the authorization can be from any country then the patentee’s rights hold no meaning and if the right to exclude and enforce such right by way of a infirngement suit would hold no meaning!
    5. S.90(2) provides that “No license granted by the Controller shall authorize the licensee to import the patented article or an article or substance made by a patented process from abroad where such importation would, but for such authorization, constitute an infringement of the rights of the patentee.”
    S.90(3) says this can be done for public interest reasons. That would be a CL issued under public interest.

    VERY far fetched..but if the Controller at the Indian Patent Office cannot authorize such importation which would adversly effect the patentee’s right how can an authority outside the country have such power?

    Reply
  8. AvatarAnonymous

    also..the statement of object and resons for the amendment act states..in just two lines…that the amendment is being made to make the provision (previous one) more effective. How can it be made more effetive by saying that some authority in some other country can be the “person duly authorized” in a manner that has the wil kill the patentees right?

    Reply
  9. AvatarJ. Sai Deepak

    Proposition:
    Under s.107A(b), “the law” authorizes a manufacturer “X” to set up base outside India to manufacture and export a product A to India despite another manufacturer “Y” having a patent on A in India.

    Conclusion:
    To protect the relevance of his Indian patent on A, Y is forced to seek patent grants in all countries (which allow such patents) to ensure that X doesn’t set up base in those countries to manufacture and export A to India.

    Reply
  10. AvatarShamnad Basheer

    Dear Anonymous:

    You stated: “When i say compulsory license i meant one issued in India. A person can be a person authorized by the Controller(or the Gov. of India) if he has a CL. And he can then authorize someone in Bangladesh to manufacture etc. under S.107A(b).”

    this is simply incorrect. If a CL has been granted in India, you dont need to seek protection under section 107A. you anyway don’t infringe. and section 107A cannot protect you in Bangladesh, if you otherwise contravene Bangladeshi law. In other words, as to whether it is an infringement or not in Bangladesh has to be decided in accordance with Bangladeshi law and not in accordance with Indian law and section 107.

    Reply
  11. AvatarShamnad Basheer

    Dear Anonymous:

    You ask: “also..the statement of object and resons for the amendment act states..in just two lines…that the amendment is being made to make the provision (previous one) more effective. How can it be made more effetive by saying that some authority in some other country can be the “person duly authorized” in a manner that has the wil kill the patentees right?”

    Being more “effective” always means protecting the patentee’s right? in which case, lets remove all the exceptions to patent infringement!!

    Reply
  12. AvatarShamnad Basheer

    Sai,

    You state: “To protect the relevance of his Indian patent on A, Y is forced to seek patent grants in all countries (which allow such patents) to ensure that X doesn’t set up base in those countries to manufacture and export A to India.”

    Your hypothetical doesn’t fit in all cases. Take bangladesh for eg, where even if you wanted, you couldnt patent (if the news item claiming they have removed pharma product patents is true).

    More importantly, you don’t even need to go this far, if your aim is to bring out how detrimental this is to a patentee. It affects the exclusive right to import and hits at its very essence–plain and simple. And I have stated all of this in the post.

    Now, as to whether such a consideration for patentee rights will cause a court to interpret this in a manner requiring the patentee consent etc is yet to be seen. In a land where there is too much rhetoric around pharma patents and where the injunction jurisprudence is heavily skewed against the patentee, I can safely bet that there will be a judge or two who are not likely to sympathetic to your lamentation that this is a mockery of patentee rights etc etc….

    Reply
  13. AvatarSaima Ansari

    Dear Shamnad,

    The post and the comments are very interesting.

    I am of the opinion that the term “who is duly authorised under the law ” not only includes the patentee, licensee but also the Government. Section 47 of the Patents Act is quoted herein below:

    Grant of patents to be subject to certain conditions-
    1. Any machine, apparatus or other article in respect of which the patent is granted or any article made by using a process in respect of which the patent is granted, may be imported or made by or on behalf of the Government for the purpose merely of its own use.

    The scope of Section 107-A (b) is much more broad than the earlier wordings.

    Best Regards,

    Saima Ansari

    Reply
  14. AvatarShamnad Basheer

    Dear Anonymous,

    I’ve thought through this further and your argument on CL might have some merit (though a CL in Bangladesh and not in India, as you envisage).

    One argument you might advance is this:

    If section 107 is interpreted in a manner such that an indian generic company can manufacture in bangladesh and then import to india, this pretty much knocks out the entire “right to import” granted under section 48. In other words, there is nothing left of the “exclusive” right to import and section 48, to this extent, is rendered redundant. I’ve tried thinking hard through all the various parameters of “imports” and can’t think of any situation where a patentee might “exclusively” import under this section. Can you?

    How then do we interpret 107 to ensure that we read some meaning into the amendment (where “permission of patentee” is changed to “duly authorised under law”). One way would be to interpret the new section 107 as even permitting imports of products produced under a CL in some other country. So lets assume that ipods are in short supply and India needs them badly. A third party obtains a compulsory license in the US and manufactures legally in the US. They then export this out to India. Since they are “duly authorised under US law”, they fall within the scope of section 107.

    The only glitch here is that under TRIPS, you have to use a CL predominantly for the purpose of satisfying the domestic market i.e the US market. Therefore, US law itself will not permit the 3rd party to export the CL manufactured ipods to be exported to India.

    The only exception here is the Doha Declaration, which permits exports for public health purposes. And if the product does satisfy the parameters of Doha, then presumably it can be exported to India. And section 107 would cover such imports. The question essentially is: given that India is a generic hub and all other countries look to India for exporting out under the Doha section, can we ever envisage a situation where India is the beneficiary of such public health imports (biologics perhaps)? In other words, can we envisage situations where section 107 would be invoked at all in the way that we interpret it. Or effectively, will our interpretation result in the amendment being redundant–since we go back to the earlier clause which used the term “duly authorised the patentee”.

    But perhaps its better that an amendment (and its intention) be effectively rendered redundant rather than an express clause such as section 48….

    All in all, this provision is likely to prove an interesting one. Now, if only a bold generic company would go ahead and test this..CIPLA perhaps?.

    Reply
  15. AvatarShamnad Basheer

    Thanks Saima,

    The name rings a familiar bell–do you know Vinay Menon at GW Business School?

    Anyway, you’re right–the government can also be the beneficiary of a parallel import provision (in fact, any third party can). And section 47 that you cite does not change this one way or the other. Section 47 can be independently invoked as well–though the key limitation here is that the government can only invoke this provision to make articles for its “own use”.

    Reply
  16. AvatarAnonymous

    Thank you very much for putting in so much thought to this! I don’t know if the following will make complete sense, but i shall put forward some arguments. I agree the sections are not fitting in together..but I am just trying to perceive some situations when they can be relevant.

    “If section 107 is interpreted in a manner such that an indian generic company can manufacture in bangladesh and then import to india, this pretty much knocks out the entire “right to import” granted under section 48.”

    – But section 107A is “certain acts not to be considered as infringement” – Under the chapter on Suits concerning infringement. If the section said “permission of patentee” as in the unamended version, then would a CL issued under the act, in all possible situations, be enforceable? E.g. if the section said permission of the patentee, would the patentee in Roche v. NATCO have to fight for their right to be heard? (though I agree this is yet to be determined) E.g. if the CL-holder wanted to hire a contract manufacturer outside India and import the product back into India could the patentee create a hurdle by saying the contract manufacturer does not have the patentees permission to manufacture? Would the CL hold any meaning?

    As for the exclusive right of the patentee under S.48…I would say a patentee has the exclusive right to import in all circumstances except when the Controller/Government/Court has (for presumably valid reasons like public interest/national emergency etc.) become the authority to duly authorize a third party to do the same. If the section said “duly authorized by the patentee”, then could a suit for infringement be filed if the drug was imported into India simply under an authorization by the Controller/Govt. etc. (I think they were trying to make the CL provisions more effective…with all the outcry on the public health and pharma front)

    On your last point…we can’t be too sure that India being the generic-hub at this point of time will always be such. We might have situations where there is a need for public health imports/national emergencies. (What if…the present-day generics cheat??? It’s all about business after all!)

    We have enough excuses to justify such public interest in our Act (affordability/accessibility etc.)..if the calculation is in their favour CIPLA might be the one!

    Reply
  17. AvatarAnonymous

    Extremely sorry for posting like a maniac!

    But when i said more effective i meant the provions 107A being more effective i.e. when certain acts would not be infringement (which cant be a provision to protect the exclusionary right of a patentee). I reproduce here the portion from the Statment of Objects and Reasons for this particular amendment:

    “Clause 57.–This clause seeks to amend section 107A of the Act, which relates to certain acts not to be considered as infringement. Sub-clause (a) proposes to include importing also within the purview of the section with a view to making the provisions more effective from the user’s point of view. Sub-clause (b) seeks to amend the existing provision to permit import of products from persons duly authorised under the law to produce and sell or distribute the product to make the provision more effective.”

    Like you have rightly pointed out.. its yet to be seen how its ‘more effective’.

    Reply
  18. AvatarJ. Sai Deepak

    Dear Sir,
    Though we have discussed this issue before over mail, for the benefit of other readers, i would like to elucidate further with the help of illustrations:

    Scene 1: X has a patent in India on a drug A. X doesnt have a patent in Bangladesh. If X sells A at $15 in India and $7 in Bangladesh, Y may import A from Bangladesh to India and sell it at $10 in India.- Rationale?- Principle of Universal Exhaustion

    Scene 2: X has a patent in India on a drug A. X doesnt have a patent in Bangladesh. Y sets up base in B’desh. Y may sell it to all countries EXCEPT India. According to Your interpretation since s.107A(b) talks of “due authorization by law” as opposed to “due authorization by the patentee”, Y would be perfectly justified in exporting the drugs frm B’desh to India. My contention is he can do so so long as it is legal for him to sell a patented commodity in a country where the patent is recognised and here since his authorisation is only by Bdeshi law, i dont see how it is legal for him to export it to India under s.107A(b).

    To this you say that this interpretation would make the amendment redundant. my counter to this is as follows:
    the earlier unamended s.107A(b) required due authorization by the patentee. This provision could be interpreted narrowly so as to limit or to negate the doctrine of universal exhaustion on account of a sale by requiring every importer to necessarily recieve direct authorisation from the patentee and mere first sale of the patented product wudnt give him an implied right. To avoid this,i believe, the amendment substituted due authorization by patentee with due authorization by law thereby explicitly recognising the doctrine of exhaustion and other means of due authorization by law. However, to extrapolate this interpretation to say that any manufacturer can set up base in a country where i do not have a patent and export it to countries where i have patents may not hold water. This is because, as i said earlier, it would impose a burden on the patentee to seek a patent in every country which grants such patents- which is not reasonable.

    Reply
  19. AvatarShamnad Basheer

    Sai,

    You state: “Scene 1: X has a patent in India on a drug A. X doesn’t have a patent in Bangladesh. If X sells A at $15 in India and $7 in Bangladesh, Y may import A from Bangladesh to India and sell it at $10 in India.- Rationale?- Principle of Universal Exhaustion”

    International exhaustion (as it is widely known) under which law?? You seem to assume that IE is a concept that automatically applies in all countries. That is simply not correct. It depends on the law of the country in question. So assuming your point is that section 107A covers only international exhaustion cases (and not cases where Y manufactures the product in Bangladesh), lets analyse this assumption a bit.

    If Y needs to import to India from Bangladesh, she can only do so, if she buys from the patentee. She cannot manufacture it herself. A slight problem here: there is no patentee in Bangladesh!! So no question of international exhaustion at all!!

    Which brings us back to square 1: can Ranbaxy argue that the “authorised by law” mean simply that there is no legal bar to production and sale in Bangladesh. On a plain simple literal reading of the section (the first primary mode of statutory interpretation taught to most of us in law school), it can. Will it result in impacting the exclusive right of a patentee under 48. You bet it will.

    Will an Indian court be concerned about this impact on a patentees right, if a Roche vs CIPLA kind of situation came up–I’m not too sure…we’ll have to wait and watch. We are concerned though about the fact that this interpretation (under a plain reading) hits at the very essence of section 48. How then do we save this right under 48 and ensure that it is not rendered redundant? And this is the discussion that I had with an anonymous commentator who raised some very interesting issues about compulsory licenses.

    I have thought of one example which ensurse that there is some “right” still left under 48, even if we permit Y to manufacture in Bangladesh. 107A(b) speaks about “duly authorised by law”. Which clearly means that a product that infringes (lets say generic versions manufactured in the US by Y) cannot be imported into India. And in some cases, where X might want to sue in India and the US, section 107A(b) permits X to do so, and to this extent, X’s exclusive right to import is preserved.

    Please note here that our primary intention is not to save the amended version (with respect to the earlier version)–which is only a secondary concern and which you seem to have focussed on, but to ask the more important and primary question: if we interpret section 107(b) according to its plain meaning, is there anything in the Indian patents act that militates against this? And if we take the example of infringed products flowing into India, we have at least one instance where the patentees exclusive right to import is being preserved.

    On a close reading of the section, another question arises. The section saves “importation of patented products…..”

    Can one argue that generic goods produced by Y in Bangladesh are automatically excluded from the purview of the seciton, as they are not “patented goods” i.e. not “patented” in Bangladesh? Or would this be countered with: it does not matter whether they are patented or not in Bangladesh–as long as they are “patented” in India, they qualify as “patented goods”. This section throws up a number of interesting interpretative problems and we need to encourage someone to test it soon–so that we have some jurisprudence developing around this.. But till that time, lets keep discussing this–as the discussion seems to have generated a number of interesting ideas..

    On another note Sai, you have to distinguish between what is a possible legal interpretation AND between what makes for good policy. So, can Ranbaxy make a plausible argument that it can legally sell in India by manufacturing in Bangladesh, by taking cover section 107A. I think it can. Is this sort of interpretation good for national policy. I’m not too sure. There are a number of factors that we need to weigh up. how much loss to the patentee, how much gain to our generics, patients etc etc.

    Reply
  20. AvatarJ. Sai Deepak

    Dear Sir,
    I hope I am not irritating you with my comments. All I seek is clarity in my own concepts. As you have rightly pointed out, it is true that my objective is to interpret the amended version of s.107A(b) harmoniously with the rest of the Act since an easier way out of the argument would be to simply lampoon the provision or to require it to be read down. Also, since this provision has not been interpreted in any judgment thus far (assuming that I am factually correct), I am trying to put forth my views on what would make for a good policy within the bounds of possible legal interpretation.

    Firstly, since this section applies to patents on all kinds of technologies, to broaden its scope only for the sake of increased accessibility to affordable medicines might not do justice to the generality of the section. Accordingly, one has to interpret it only with respect to a patentee as such and not a pharma patent-holder.

    Secondly, there shouldn’t be any problem on what are “patented goods” since both s.2(o) read along with s.2(m), and s.82(a), speak of a patented article or process as those which are protected by a “patent” and “patent” means a patent granted under the Indian Act.

    Moving to the core issue of what is it that s.107A(b) actually attempts to convey, I shall try and interpret without venturing into the issue of Compulsory Licensing. I believe that the Act cannot in any way restrict or regulate the actions of a person in another country; the Act looks inwards. In other words, it can only regulate those actions which have an Indian interface, either “to India” or “from India”. So the section cannot be interpreted so as to acknowledge the legality or the lack of it of those actions which have no Indian interface. Accordingly, s.107A(b) does not speak of or impute validity to an “export from another country”, but only of “imports into India”. This means that even if a B’deshi law authorizes a person to export a product to India, this need not translate to a valid import into India. The underlying question is which law does s.107A(b) refer to? Is it “law” as in “any law” or does it point to something specific? To understand this, I reproduce the section below:

    s. 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, sale or import of any product;

    b. importation of patented products by any person from a person who is duly authorised UNDER THE LAW to produce and sell or distribute the product,

    shall not be considered as a infringement of patent rights.

    Since s.107A(b) refers to “THE LAW”, is it not possible that the reference is to the Act specifically since it does not speak of “ANY LAW” as in s.107A(a) or “BY LAW”? A possible counter to this approach is that since in the rest of the Act, the Act has been referred to as “UNDER THIS ACT”, “THE LAW” is not the same as “UNDER THIS ACT”. Yet, when one compares the generality of s.107A(a) and the specificity of s.107A(b), such an interpretation does not seem entirely improbable. Also, I see that your primary contention against imputing “duly authorised under the law” the same meaning as “duly authorised by the patentee” is that such an interpretation would render the amendment redundant. I seek to differ with you on this. Though it is imperative that every word be given its due meaning in a manner so as to avoid redundancy, it is not necessary that an amended provision has to always differ in its content and import from the unamended version. Applying the principles of interpretation of statutes as applied to Constitutional law, it has been accepted that amendments, though differently worded, could be alternative expressions of equivalent content in the original unamended Constitution or previous amendments. For instance, the American Bill of Rights added no new content, not implicit in the original unamended Constitution, except the twenty dollar rule of the Seventh Amendment. This means that “duly authorised by law” could mean the same thing as “duly authorised by the patentee” and such an interpretation would not be at loggerheads with any other provision.

    Even from the perspective of a “plain literal reading” of the provision, which according to you Ranbaxy or CIPLA could use to their advantage, I believe there is an exception to the rule of “literal construction”. One could use the golden rule in cases where adherence to the ordinary meaning of the words used, and to the grammatical construction, is at variance with the intention of the legislature or “leads to repugnance”, the language could be varied only in as much as the inconvenience is avoided. Since you have yourself said that a plain and literal reading of s.107A(b) hits the patentee’s cardinal right of import under s.48 in addition to rendering irrelevant his patent, the golden rule can be very well applied to interpret “duly authorised under the law” narrowly, for a narrow interpretation of a broad provision is easier than extrapolation of a narrow provision.

    Kindly let me know if I have made unwarranted assumptions.

    Reply
  21. AvatarAnonymous

    Sai,

    I agree with you. few points however,

    i. The attempts we are making at interpreting such provision is futuristic and case sensitive. The act cannot possibly perceive all situations where such provisions can be invoked. (can we list out such possible situtaions?)The interpretation of such provisions is usually developed with case law. So, may be you are right about not limiting it to CLs

    ii. i do not agree with your submission that “THE LAW” can be said to be the same as “UNDER THIS ACT”. ‘The law’ or ‘under this act’ etc. cannot be simply inconsistent use of language (and more importantly the Court is unlikely to see it as such)

    iii. the surrounding language used in S.107A
    (a) and (b) seems to give clear distinction btw “any law” and “under the law”. (the former being broader).

    I am sure we are driving fellow readers crazy!:)

    Reply
  22. AvatarShamnad Basheer

    Dear Sai and Anonymous,

    If not for anything else, this one post has broken the existing record for most number of comments on SpicyIP 🙂

    Sai–I, and am sure most of our readers as well, love a healthy discussion–so keep it coming. But it would be very helpful for all of us, if we did not regurgitate old points–if we didn’t agree with them, we could simply agree to disagree–if not, we will cotinue to rehash old arguments till the end of time! So lets again take some of your assumptions:

    1. “I believe that the Act cannot in any way restrict or regulate the actions of a person in another country; the Act looks inwards.”

    Plenty of instances where the Act touches on activities abroad. eg. filing patent applications abroad. Plenty of Indian statutes do this, and I don’t necessarily see a problem.

    2. “Since s.107A(b) refers to “THE LAW”, is it not possible that the reference is to the Act specifically since it does not speak of “ANY LAW” as in s.107A(a) or “BY LAW”?”

    I agree with the anonymous commentator here. This is plain ridiculous. With such an interpretation, you’re essentially begging the question!! Section 107A(b) attempts to spell out situations under which an import to India would be legal. And to determine this, you wish to ask: “has the person been duly authorised under Indian law!!” and pray, what is Indian law on this point? Section 107A(b)??-very circular argument and it will leave you dazed….

    3. “Applying the principles of interpretation of statutes as applied to Constitutional law, it has been accepted that amendments, though differently worded, could be alternative expressions of equivalent content in the original unamended Constitution or previous amendments. For instance, the American Bill of Rights added no new content, not implicit in the original unamended Constitution, except the twenty dollar rule of the Seventh Amendment”

    American constitutional law for interpreting an Indian statute?? Nothing wrong with this, except that I’m sure we have plenty of case law in our country to suggest that an amendment mostly means that something has changed….(unless it specifically states or we can necessarily infer that it is “clarificatory”. As one of our readers pointed out, somewhere in the objects, it is stated that the amendment wishes to make the provision “more effective”…. are we making this more effective by reading it in exactly the same way as it was prior to the amendment??

    4. “Also, I see that your primary contention against imputing “duly authorised under the law” the same meaning as “duly authorised by the patentee” is that such an interpretation would render the amendment redundant.”

    No–you have it wrong. My primary contention is that a plain literal reading supports the hypothetical that Ranbaxy can import a patented drug (patented in India) into India, provided there is nothing in Bangladeshi law that prohibits the production/sale of such drug within Bangladesh. In other words, the drug is “duly authorised under Bangladeshi law”. If you have to disagree, then you have to tell me why. Why should this be read to mean “duly authorised by the patentee”?? i.e. what it stated prior to the amendment.

    Because it erodes the rights of a patentee– but so what? There are plenty of provisions in the Patents Act that erode the rights of a patentee. Unless you tell me that it completely eviscerates the right to import. In which case, I would agree that the right to import is practically redundant.

    But that is not the case, as I have shown in my earlier post, since Roche/Pfizer can still prevent the imports of goods that might have infringed in the country where they were produced.

    The only other credible ground for not interpreting in the way that I suggest is that this might violate TRIPS. And this is one ground that I think is a serious one–but till a WTO panel determines its import, will an Indian judge even go into this terrain is one question that will remain unanswered till we have an actual case before the court…

    Reply
  23. AvatarJ. Sai Deepak

    Dear Sir and “anonymous” commentator,
    One example with respect to an amendment which essentially conveys the same thing as the unamended version would be the definition of “patent” itself under s.2(m). The earlier definition was as follows:
    “patent” means a patent granted under this Act.
    The amended section is as follows:
    “patent” means a patent FOR ANY INVENTION granted under this Act.

    Please explain how does the insertion of “for any invention” change the meaning of this section. Is this amendment “redundant” and so requires us to impute new meaning to the section?

    As for my arguments being “old wine in a new bottle”, i believe several “incisive posts” on this topic have chewed the same old cud and i am merely trying to break the pattern at the expense of sounding tautologous 🙂

    With this i guess i shall stop and wait for the Courts to decide one way or the other or may be as you often say, “take an Aristotlean Golden mean approach”. A small disclaimer: i was only trying to find out “what is right” rather than “who is right”. So its not a question of us agreeing to disagree; if my interpretation is comprehensively countered, i shouldnt have any qualms in changing my opinions for this is after all an academic discussion. Anyways, this discussion has certainly added value to what i know. I am not sure if this feeling is mutual 🙂

    Reply
  24. AvatarNilanjana

    OK, to add more fuel to fire:
    I disagree with Basheer’s interpretation of the term “who is duly authorised under the law to produce and sell or distribute the product” in his reply to one of anonymous’s earlier queries. I think that the whole phrase taken in totality would still mean the patentee even under common English usage of the said terms if the patent was legally valid. What you are trying to do is to break up part of the phrase (who is duly authorised under the law) thereby giving a different/out of context meaning.

    Reply
  25. AvatarShamnad Basheer

    Thanks Nilanjana,

    I think I did interpret keepint the whole phrase in mind. So according to you, the whole phrase would mean that the permission of the patentee would need to be taken–in a country like Bangladesh, where there is no “patent” or “patentee” in the first place??

    Reply
  26. AvatarNilanjana

    No. What I mean is that contrary to your reading of the phrase, local/Indian Pharma giants cannot make products in Bangladesh and import into India unless he is authorized to produce, sell or distribute the product (in India) which would basically read to mean the patentee or licensor. In other words the rephrasing of section 107A(b) has not changed its meaning. What happens in Bangladesh has to be in accordance with the laws of that country. I was not commenting on that.

    Reply
  27. AvatarShamnad Basheer

    Nilanjana,

    So you’re essentially arguing that “law” in the section means Indian law. If you read through all the comments carefully, you’ll notice that this issue has already been dealt with. My response to this earlier was:

    ” This is plain ridiculous. With such an interpretation, you’re essentially begging the question!! Section 107A(b) attempts to spell out situations under which an import to India would be legal. And to determine this, you wish to ask: “has the person been duly authorised under Indian law!!” and pray, what is Indian law on this point? Section 107A(b)??-very circular argument and it will leave you dazed….”

    Reply
  28. AvatarAnonymous

    Dear Shamnad,

    I think Nilanjana has got it spot on…
    Since your interpretation would essentially mean that holding an Indian patent [for any product, not just drugs] has no relevance…

    Any defendand can get it manufactured in Bangladesh and then import it into INdia.

    So, I don’t need to file Indian patents, no need for Indian patent lawyers and lets just chuck the entire Indian patent filing / office system…

    Sai/ Nilanajana,
    I agree with you guys that the ‘THE law’ must be read to be INdian law and that import in India will need authorisation from Indian patentee.

    Reply
  29. AvatarShamnad Basheer

    Dear Anonymous (not sure who you are or which industry you represent),

    Firstly, you seem to have completely missed the point that interpreting it as “indian law” will beg the question–i.e. what is “Indian” law on this point? Section 107A(b)? You don’t address this issue at all in your response, that is predicated on a number of assumptions, that I will come to in a while.

    Secondly, the issue you raise is one that has been dealt with in previous posts/comments. Kindly go through earlier posts so that we don’t waste time repeating the same things again.

    A plain reading of the section, would, to my mind, enable exports from Bangladesh. If you think this plain reading is wrong, then you have to suggest as to why you think so. One might argue that it hits at the very essence of section 48–but like I’ve stated in another post, you still retain the right to prevent infringing imports (imports that might have infringed in the exporting country and therefore are not “duly authorised under the laws of that country) . to this extent, the right to import is not completely eviscerated.

    You state: “Any defendand can get it manufactured in Bangladesh and then import it into INdia.”

    Your statement assumes that any patented good can be manufactured with ease in Bangladesh. Not always the case. Even in the context of pharma, they don’t have expertise in the way that India has and expecting them to acquire this overnight is not realistic. Secondly, LDC leeway until 2016 is only for areas of technology like pharma where they did not provide for patnet protection–and not for other areas of technology. where there may well be a patent that prevents the exporter. So as opposed to assuming (like you do) that it will completely eviscerate the rights of a patentee, I would be a little more cautious and ask for figures and data. What is the likely loss to a patentee from such an interpretation? What is the likely benefit to Indian consumers and the public? And the generic companies? We don’t need to protect the rights of a patentee just for the heck of it. These are not god gtiven or natural rights–rather, they are soio-economic tools that can be calibrated carefully by a country. Read my post on “Faith vs Fact based IP” to get a better sense of what I am talking about. And robust “policy” has to be based on such calibration. Calibration cannot come out of blanket assumptions that:

    i) the rights of a patentee are completely eviscerated in this context
    ii) we have to protect the rights of a patentee in all contexts and unconditionally.

    The point I wanted to drive home by putting out this post is that there is a significant loophole in teh section that can be exploited. Now, there are two ways India can go. Either decide that this needs to be plugged–if not, it harms the rights of a patentee etc–and on the balance we need to protect these rights in this context. Or India can decide that as a sovereign country, it is well within its rights to take away rights that it has granted statutorily in wider “national interest”. But this policy debate has to be undertaken separately and must be done with facts and figures and must not rest on blind assumptions and statements put forward by stakeholders with a vested interest in the regime…

    Reply
  30. AvatarAnonymous

    Anonymous,

    I don’t see anything in Section 107 A (b) that suggests it to be read as ‘Indian law’. There is a definite loophole in the Section. I am not going in the details of it as it already has been covered by the comments. If you are saying it has to be essentially Indian law then as Shamnad has already pointed out, it would be interesting to know as to why you think so or how does the section refers specifically to ‘Indian law’.

    Reply
  31. AvatarNilanjana

    Well, all I can say is that its a shoddy peice of legal drafting.

    I the absence of any explicit wording to the contrary, I would assume that it is the Indian law we should be bothered. After all laws are largely territorial.

    Reply
  32. AvatarAnonymous

    I agree with Nilanjana that the law should be read as Indian law else, it must be specific that the law referred to is from the importing state.

    And while at this point, do you/ Shamnad have an answer as to what happens when we use ‘Bangladesh law’ as the ruling law?
    As I said earlier, using Bangladesh law means that our entire patent filing/ prosecution system becomes moot and there is no right/ property left to the patentee…

    You guys just manufacture every [Indian] patented commodity in Bangladesh and import it in here…

    Don’t you think that a law should NOT be given an interpretation that renders totally useless and meaningless to the people affected by that law?

    So, now revert only on impact on Indian patent law/ patent holders, if we, arguendo, take that the law of importing country is called into question!

    Reply
  33. AvatarCurious

    Sorry to rehash an old debate here but is there any clarity on the interpretation of this section in the past 9 years?

    Reply

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