CH Unni writes a front page story in the Mint on section 107A(b) and the possibility that this ambiguous provision could be strategically exploited by Indian generic companies to import drugs from Bangladesh to India. Readers will recollect that SpicyIP ran a couple of posts on this topic. See here and here.
In fact, this post here generated the most number of comments (about 25 comments so far) that the blog has seen so far!! For those interested in the intricacies of this section, please read through the comments carefully. SpicyIP is terribly pleased that this article dealing with “patents” made it to the front page of the Mint, demonstrating the importance of “patents” and their impact. Bodes well for our campaign to enhance awareness around IP issues and to promote more dialogue and transparency.
Back to Unni’s piece, which we reproduce in its entirety below:
COMPANIES RUSH TO EXPLOIT PATENT LAW
Local firms can import generics made in least developed countries without authorization of the patent holder
By C.H. Unnikrishnan
Mumbai: Indian pharma companies have discovered a loophole in the country’s patent laws that could allow them to sell copycat versions of patented drugs here and are quietly firming up plans for this, although some experts are of the view that this approach violates World Trade Organization, or WTO, norms and even one Indian patent law.
The loophole is actually a provision—Section 107A(b) of the Indian patent law amended in 2005—that allows local companies to import copycat or generic drugs manufactured in least developed countries such as Bangladesh, Nepal and several African nations, without the authorization of the patent holder.
LEAKY PROTECTION?
This means companies here can import drugs from a country where pharma patents are not in effect if the local law in that country authorizes the manufacture of those medicines. In the earlier version of the law, an authorization by the patent holder was a compulsory requirement.
Indian drug makers have rushed to take advantage of this, and several of them have even started working on building manufacturing plants in these countries. The new provision may not be in complete compliance with the international trade rules of WTO. However, a smart judiciary interpretation could make it possible for generic drug companies such as Cipla Ltd, Ranbaxy, Sun Pharmaceutical Industries Ltd, Dr Reddy’s Laboratories Ltd and Natco Pharma Ltd to set up manufacturing facilities in least developed countries, according to patent law experts.
“A literal reading of Section 107A(b) would seem to suggest that Cipla or Ranbaxy, for instance, could set up shop in a country with no pharma patents such as Bangladesh and then export (say) Roche’s (F Hoffman La Roche Ltd) patented drugs to India,” said Shamnad Basheer, an international patent law expert and a research associate at Oxford IP Research Centre.
“Section 107A(b) earlier insisted that a company could import such drugs only if it purchased them from a person ‘who was duly authorised by the patentee’ to sell those drugs in Bangladesh,” he said. According to Basheer, the provision was amended in 2005 to say that it was not necessary for the exporter in Bangladesh to be authorized by the patentee. As a result, if the exporter is authorized by the law in Bangladesh to produce and sell the product, a drug maker such as Cipla can import that product legally under Section 107A(b).
Thus, Cipla’s recent decision to set up joint venture companies in African countries such as Uganda and Morocco with local partners will help the company do this. And Mumbai-based Sun Pharma, which has a manufacturing plant in Bangladesh, can explore this option. Ranbaxy Laboratories Ltd, the country’s largest drug maker, already has manufacturing facilities in least developed countries including in Africa.
Still, Indian drug makers are being discreet about their plans.
“Our plans are not yet ready in this regard as issues such as (laws on) importation of drugs from a least developed country and exporting patented drugs to countries where pharma patents are not applicable are still not clear,” said Cipla chairman and managing director Y.K. Hamied.
A spokesperson for Sun Pharma said: “We are still studying the relevant section and would take some time to interpret it.” According to Basheer, the only hurdle is with the interpretation of certain sections of the law as companies that choose to import patented drugs from least developed countries might run a serious risk of violating the exclusive right to import guaranteed under Trade Related Aspects of Intellectual Property Rights, or TRIPS.
It remains to be seen if approached, whether an Indian court will interpret Section 107A(b) in accordance with what it believes to be the correct TRIPS interpretation, he said.
“The import restriction notified in the country’s customs regulations for patented products also matters a lot to conclude whether such imports will be easy,” said Gopakumar Nair, a Mumbai-based patent consultant.
There is also a direct threat from patent holders, who could persuade their respective home governments to drag India to WTO for violating TRIPS agreement, because it is still not clear if the provision (Section 107A(b)) is in compliance with it, according to another patent law expert who did not wish to be identified. An email query sent to the president of the Organisation of Pharmaceutical Producers of India, or OPPI, the industry body representing multinational drug makers present in India, remained unanswered as he was travelling.
According to a recent post in an international patent blog SpicyIP, selling copycat drugs in India manufactured in least developed countries violates TRIPS norms as there is no first sale of the patented drug by the patentee as required in TRIPS.
“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 107A(b) —will be seen to violate Article 28 of TRIPS,” the blog says.
A senior lawyer from New Delhi who specializes in intellectual property, points to another rule in the Indian Patent Act that protects the right of the patent holder. “Section 48 of the Indian Patent Act requires that a patentee’s exclusive right to ‘import’ be protected. Section 107A(b) hits at the very essence of this right,” he said.
Taking this into account, an Indian judge could render the amendment to Section 107A redundant, and revert to the earlier provision, which said it is not an infringement to import a patented product only if the import was from an exporter ‘duly authorised by the patentee’, the lawyer, who did not wish to be identified, added.”
Hi Sir!
It is indeed great to see that the blog and our comments are reaching out and initiating such debates at a higher level.
But you really feel the section is a loophole? or redundant? or is it suffering from the “S.3(d)-like-defect” ..unclear..ambiguous language! Coz if the “duly authorized by law” is held to mean the law in India..there would be no such controversy. And i dont know if a Judge faced with this question would really go any other way for three reasons, already noted before:
i. it would mean destroying the essence of the patent right
ii. contravention of TRIPS and risk of being dragged to the WTO
iii. pissing off a lot of ppl..patent holders and patent protectors alike. To add to this chaos India has been listed in the USTR 301 report as a ‘priority watch’ country for “for failing to protect the copyrights, patents, and trademarks of American producers from piracy.”
But if he does say it means duly authorized under India law..the patentee is happy (better than before)..the Govt can do what it likes (when it needs to)without running to the patentee for permission!
Thanks Anonymous,
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….”
I remember coz i made that comment too. I was reading the Report of the Fourth Peoples’ Commission on
Review of Legislations Amending
Patents Act 1970, October 2004. http://www.who.int/intellectualproperty/documents/Report4thCommission.pdf
In this report Section 107A(b) was proposed to be amended:
“CHAPTER XVIII : SUITS CONCERINING INERINGEMENT OF PATENTS
Section 107 A : Certain acts not to be considered as infringement
31. 107 A. 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 importing of any product ;
(b) importation of patented products by any person from a person who is
duly authorised by the patentee to sell or distribute the product, shall not be
considered as a infringement of patent rights.
107 A. May be substituted as follows :
(a) any act of making, constructing, using, selling or importing a patented
invention for uses reasonably related to the development and submission of
information required under any law for the time being in force, in India, that
regulates the manufacture, construction, use, sale or importing of any product;
(b) importation of a patented product at cheaper prices or to meet the shortages in
the country by any person authorised by the Controller from a person who is
duly authorised under the law to produce and sell or distribute the product,
shall not be considered as an infringement of the patents rights.”
I know this is not how the section appears now..but if it was i would have been slightly correct?
Shamnad,
If your views that the law should be of the nation from which the patented substance [not just drugs, since the section is completely open ended], then lets just throw the entire Indian patent act and the patent mechanism to the dust bin.
Since according to your interpretation, any production in LDC is OK [I agree] but import from LDC [without permission from INdian patentee] to India is also OK [i do not agree], so there is no point in any one filing a patent in India, right?
Now, what do you think?
If any thing can be made and imported from Bangladesh and imported into India, then I do not need Indian patent filing lawyers, litigation lawyers and I do not need the patent act!
Hi Shamnad sir
Din realise the number of comments to the parallel import post of April 18th had risen from 25 to 36. Just read them. All this deliberation does not really matter..wat matters is whether after all this deliberation ‘a CIPLAtic generic’ would bother to try importing drugs manufactured elsewhere into India!
I shall call myself anonymous-1! 🙂 I am sure you figured who I am ..but too many anonymous commentators are puttin me in an identity crisis! Thanx for the interest you showed in the first 25 comments to the April 18th post. But if you think there is any merit in my post above …with the recommendation made in the October 2004 Report..do let me know. I know its a recommendation..it wasnt adopted etc..but I think it is on the same lines. The language of the final section is definitely much more confusing than what was recommended and what was there before amendment.
Dear Anonymous,
Of course, I know who you are. Thanks for sharing these thoughts and continuing to engage with this discussion in a constructive way. The problem that I see with this issue (and one that you have appropriately flagged as well) is this:
A literal reading of the section suggests that the permission of the patentee need not be taken. Particularly in the light of the fact that the amendment expressly changed the earlier clause requiring the permission of the patentee. Now the issue is: does “law” mean Bangladeshi law or Indian law. If it is read to mean Indian law, there is a clear logical inconsistency. One has to ask: what is the “Indian law” on this point. Isn’t section 107A itself the Indian law on the point. In other words, we are begging the question and not getting anywhere.
It therefore clearly has to mean the law of the exporting country. Unfortunately, if the exporting country is Bangladesh where there is no patent, then the import pretty much hits at the essence of the exclusive right to import guaranteed under the Patents Act. And even mandated under TRIPS. Of course, a country like India is free to decide to go this way if it wanted. But we’re not sure (absent policy data on this point), whether or not this is desirable. In the absence of indicators on national policy/priorities, the easiest way for a judge to save the situation is to read the term “patented products” to mean “patented” in the exporting country.
So, if the drug is not patented in Bangladesh, section 107A does not apply. In other words, if Ranbaxy manufactures in Bangladesh and exports to India, it cannot avail of the defence under Section 107A. ANd such an import would be a violation the patentees exclusive right under section 48. One may argue that this reading of the term “patented products” goes against the definition of a “patented article” in the definitional section (section 2) which defines this term to mean an article patented in India.
However, this deviation from the definitional section is quite minor, if a judge is of the view that the harm done to a patentees right (if section 107A is read to mean that Bangladeshi products can be brought in) is considerable. And certainly a better way to resolve this issue than to insist on the logical fallacy of interpreting “law” to mean “indian law”. Further, any interpretation where we go back to the earlier norm of having to specifically take the permission of the patentee might prove problematic even in cases of normal exhaustion–where the good may be sold and resold several times before being exported to India. In such a case, would an exporter/importer always have to contact the patentee to take permission, even when the first sale of the good has taken place by the patentee (or his/her agent) and the rights in that good have been “exhausted”.
Anyway, it’ll be interesting to see if this issue actually comes up in court one of these days.
This time I see greater vagueness in the section!
shall look around more and write back!
anonymous 1
so it seems “duly authorised by the law” can entirely change the scenario when it comes to importation of patented drugs to India or in other words export of patented molecules to developing countries! My understanding was as an LDC Bangladesh can copy any patented drugs and export them to LDCs only provided they have the sufficient pharma capabilities. Hypothetically if 107A(b) allows such importation into India, then India will be allowed to import virtually any patented drugs manufactured via Bangladesh. Is it that easy? I personally think this would be gross violation of TRIPS treaty and no way acceptable to patent holders.
so it seems “duly authorised by the law” can entirely change the scenario when it comes to importation of patented drugs to India or in other words export of patented molecules to developing countries! My understanding was as an LDC Bangladesh can copy any patented drugs and export them to LDCs only provided they have the sufficient pharma capabilities. Hypothetically if 107A(b) allows such importation into India, then India will be allowed to import virtually any patented drugs manufactured via Bangladesh. Is it that easy? I personally think this would be gross violation of TRIPS treaty and no way acceptable to patent holders.