Patent

Section 107A(b): A Preliminary Summary of Thoughts On International Exhaustion


In the last two posts, I took the view:
1. That Section 107A(b) does not refer to international exhaustion since it creates an exception from infringement for importation into India, of a good which is protected by a patent in India, from a  person who has been duly authorized to produce and sell or distribute the patented product in India.  
2. This I did on the basis that “duly authorized under the law to produce and sell or distribute the patented product” refers only to authorization under Indian law. The rationale behind this view is that if authorization to produce, sell and distribute the good were to be interpreted as an authorization under the law of any foreign country, then every manufacturer, who is authorized under such foreign law to produce, sell /distribute the good in such foreign country, could import the product into India and render the Indian patent useless.
3. Further, Indian law can authorize production, sale and distribution only within the territory of India. Therefore, it is clear that “under the law” refers to only Indian legislations.
4. I had also taken the view that such importation into India of the patented product by any person must be directly from a person who has been authorized to manufacture, sell/distribute it in India. If the patented product is procured from any other source other than the authorized person (or even bought from the authorized person and subsequently imported into India), such importation would constitute infringement of the Indian patent.
A Few More Ways of Interpreting Section 107A(b)

The above conclusions can be arrived at from another broad approach as well. The provision prior to the amendment spoke of “duly authorized by the patentee”, whereas the current amended provision reads “duly authorized under the law”.
It must be noted here that when referring to the patentee in the un-amended version, english language per force required the use of “by the patentee. However, when the reference is to “the law”, there are two distinct legal plausibilites, namely “by the law” and “under the law”. Each of these has different legal connotations.
Further, “permitted by the law” is even more distinct from “duly authorized under the law”. If this is the case, “duly authorized under the law” has to be necessarily imputed a distinct meaning from “permitted by the law”. 
Between “permitted by the law” and “duly authorized under the law”, the latter comes relatively closest in meaning to “duly authorized by the patentee”. What one is driving at is that all rights which were available solely to the patentee to restrict the scope and extent of distribution of the patented product are now available to specific Indian legislations by virtue of “under the law”.
Therefore, the primary difference between the un-amended and amended versions of the provision is that earlier the buck stopped at the patentee, whereas now, besides the patentee under the Patents Act, other Indian legislations too may authorize the production and sale/distribution of the patented product in India.  


Simply put, the patentee does not stand excluded from the phrase “duly authorized under the law”, he happens to be just one of the authorities under the law who may dictate the movement of the patented product within the territory of India.  
Conclusion

The gist of the ruminations in these last 3 posts is that international exhaustion does not appear to flow from any interpretation of Section 107A(b). In fact, one might say that territorial exhaustion does not seem to be precluded from the provision. Of course, it’s another issue that these conclusions may stand contested by those who think the conclusions are distinctly pro-patentee. 
But then, where does it say that an Indian IP legislation cannot have a provision which is pro-right holder? Or that merely because it is pro-right holder, it is against public interest? Had that been the case, since a patent is pro-patentee, the grant of a patent itself should be viewed as being against public interest…
We welcome the opinions of our readers. 

15 comments.

  1. AvatarAnonymous

    Say for ex. X company is selling A product in Thailand.
    There is no patent for A in Thailand. Therefore X company is duly authorized under the law of Thailand to sell A. Now Z company of India imports A from X company of Thailand. P company has a patent on A in India. Can this be considered as non-infringement under Sec 107(A)(b)?

    Reply
  2. AvatarPrashant Reddy

    Hi Sai,

    Interesting post.

    I had a doubt. Your interpretation of S. 107A(b) while plausible seems to be already covered by Section 48 which restrains the import of patented products without the consent of the patentees.

    If we were to go by your interpretation we would basically have two provisions in the Act stating the same law i.e. Section 48 and S. 107(A)

    Right or wrong?

    Cheers,
    Prashant

    Reply
  3. AvatarJ.Sai Deepak

    Dear Anon,
    It constitutes infringement because I reiterating that “duly authorized under the law” is to be interpreted as “duly authorized under Indian law”. Authorization under Thai law to produce, sell/distribute is of no relevance to the provision.

    Best Regards,
    Sai.

    Reply
  4. AvatarJ.Sai Deepak

    Hi Prashant,

    1. Where Section 48 gives the patentee a right to exclude third parties from importing the patented products, Section 107A(b) is a limited defense to an action for infringement instituted against him for importation of the patented product, provided the defendant satisfies the qualifications laid down under the provision.

    Therefore, these 2 provisions serve different purposes. One scopes out the right of the patentee and the other etches a limited niche within the right of the patentee in favour of the person authorized under Indian law.

    2. The default position, in the absence of an express authorization under Indian law, as envisaged in Section 107A(b), is that only the patentee gets to import the patented product into India. This means that when no such authorization has been issued under Indian law, it is the rights of the patentee under Section 48 which are at work.

    However, when an authorization such as the one spoken of in Section 107A(b) is issued to a third party, Section 107A(b) comes alive and makes itself relevant to the situation. Consequent to such authorization under Indian law, the rights of the patentee under Section 48 will per force have to make way for the rights of the so-authorized third party.

    Therefore, neither provision is redundant, both interplay only when the situations/exceptions envisaged in Section 107A(b) come into being.

    In other words, merely because both Section 48 and Section 107A(b) have been provided for in the Act, it does not follow that both have to work contemporaneously at all times.

    Consequently, the answer to your short question- Wrong

    Bests,
    Sai.

    Reply
  5. AvatarPrashant Reddy

    hmmm….interesting. So under what provisions of the Patent Act can a person be ‘duly authorized under the law’ if not a voluntary licence by the patentee himself? My apologies if you’ve already answered this question in one of your four posts on the topics.

    Cheers,
    Prashant

    Reply
  6. AvatarJ.Sai Deepak

    Thanks Prashant, Yes I have given the non-limiting example of a compulsory licensee in the first, second and fourth posts to illustrate the point. I call it non-limiting because there could be future Indian legislations or existing Indian legislations other than the Patents Act which I am not aware of, which authorize a third party to produce/sell and distribute the patented product in India, notwithstanding the grant of an Indian patent.

    Bests,
    Sai.

    Reply
  7. AvatarPrashant Reddy

    Hi Sai,

    Thanks for your response. As per Section 93 compulsory licences operate as deed between both parties. Therefore if the Controller has not allowed for importation as a clause of the licence then the licencee cannot import the good. The only way the licencee can import the good is if the Controller allows him to do so as a term of the compulsory license OR if the Central Government issues directions under Section 90(3).

    Are you saying that S. 107A(2) will apply regardless of whether the act of importing is authorized by the CL?

    Cheers,
    Prashant

    Reply
  8. AvatarJ.Sai Deepak

    Hi Prashant,

    My apologies for the delay in responding to your comment, haven’t sat before the computer for the better part of the day. This is good stuff and the discussion is now beginning to get interesting. Let me try and see if I can give a sensible enough answer to your question, because I am sure you have thought this through.

    Let’s consider the combined interpretations of Sections 84, 90(2), 90(3), 93 and 107A(b) because I think these, when read together, throw up a few interesting possibilities which are worth considering. I am thinking on my feet here, so please haul me up wherever I go astray. Here it goes:

    1. My proposition thus far in the four posts on Section 107A(b) has been, and that too with increasing assertiveness, that “duly authorized under law to produce and sell or distribute” is to be interpreted as “duly authorized under Indian law to produce and sell or distribute in India”. I had also taken the view that “duly authorized” requires a specific authorization, and that it does not refer to an implied license to produce, sell or distribute which flows from international exhaustion.

    2. Now I notice that the word “authorise” has been used in Sub-Sections (2) and (3) of Section 90, and pertinently both sub-sections deal with authorization for import either by the Controller or the Central Government. I’ll come back to using these sub-sections in the later part of the comment, I am just flagging for now the mention of authorization for import in these provisions.

    3. In the absence of sub-sections 2 and 3 of Section 90, and Section 93, if one had only Sections 84 and 107A(b) to deal with, then my answer would have been a clear yes, because I could have said that:

    A. The compulsory license is an authorization under Indian law to produce, sell/distribute the patented product in India- This falls within the meaning of the authorization referred to in Section 107A(b).

    B. Therefore, since an authorization has been given under Indian law, the compulsory licensee may import the product into India from his own manufacturing base outside India.

    “To Be Continued”

    Reply
  9. AvatarJ.Sai Deepak

    Now let’s consider a situation where sub-sections 2 and 3 of Section 90 are absent. So I am dealing with with Section 84, 93 and 107A(b)together. Since Section 93 deems the order for a compulsory license as a license granted by the patentee, it creates a legal fiction wherein a violation of the terms of the compulsory licence is not merely a violation of the order of grant of the CL, but actually a breach of the “licence deed” and consequently, an infringement of the rights of the patentee.

    What this could mean is that ultimately the law, by virtue of Section 93, assigns to the patentee the role of the authority under law, who has authorized/granted a license to the compulsory licensee, with the law merely playing a mid-wife to both the parties in facilitating the grant of the CL.

    If this be the case, according to my interpretation of Section 107A(b) in my posts, the compulsory licensee can import the product from a person who has been authorized under Indian law. Thanks to Section 93, the authorized person under Section 107A(b) is not only the compulsory licensee, but also the patentee himself, because the CL is in the nature of a license granted to compulsory licensee.

    The net result would be that the compulsory licensee can import the product into India from the Indian patentee’s foreign manufacturing unit arm or his own foreign manufacturing unit. Simply put, to be entitled to the defense under Section 107A(b), the compulsory licensee may import the patented product either from the Indian patentee’s or his own manufacturing units, which are based out of India.

    This situation is possible (we are still assuming for the purposes of this situation that subsection 2 and 3 of 90 are non-existent) because the compulsory licensee would have been able to import the products into India, in addition to manufacturing it. If such import had to be safe from any claim of infringement from the patentee, the law had to per force provide for an exception in the form of Section 107A(b). Therefore, in the absence of sub-sections 2 and 3 of Section 90, the presence of Section 107A(b) would have served, not a clarificatory purpose, but a real discernible purpose because the Act would have had to expressly exempt import from infringement.

    “TO BE CONTINUED”

    Reply
  10. AvatarJ.Sai Deepak

    Now finally, let us consider the situation under the present position of the Act where Section 84, sub-sections 2 and 3 of Section 90, Sections 93 and 107A(b) are all present and they have to be read together.

    I had earlier flagged the presence of “authorise” in sub-section 2 and 3 of Section 90 in the context of authorization of import. These sub-sections clarify a couple of things:

    1. Again, “authorise” is a word which is not to be interpreted loosely because it means express permission. Therefore, the same interpretation applies to the use of the word in Section 107A(b) as well.

    2. import would be infringement in the absence of such authorization under atleast one of the sub-sections.

    The question is how do I justify my interpretation of Section 107A(b) in the light of these two sub-sections? Let’s restate the provisions as:

    1. Sub-section 2 and 3 of Section 90 state that in the absence of authorization either by the Controller or the Central Government, the import of the patented product (pr product manufactured by a patented process) would constitute infringement of the patentee’s rights.

    2. Section 107A(b) states that when authorization under Indian law to produce, sell and distribute in India has been given to a person, importation of the patented product from such person shall not constitute infringement of the rights of the patentee.

    I see your point here; under Section 90(2) and (3), import is infringing unless import is specifically authorized; whereas under Section 107A(b), import is deemed as non-infringing if the importation is by a person from a person who has been authorized to produce, sell/distribute under Indian law.

    In other words, express authorization for import is required under Section 90(2) and (3) whereas express authorization to produce sell and distribute in India is required under Section 107A(b).

    Point taken 🙂 Brilliant!

    But what this probably proves is that the example of the compulsory license which I had given is not the right one (let’s call it the wrong one), but that does not detract from the interpretation of Section 107A(b) that I put forth; if anything this discussion has probably lent greater credence to it because it has become even more plausible. That said, this was a thought-provoking exercise, loved it! Thanks a bunch!

    Bests,
    Sai.

    Reply
  11. AvatarJ.Sai Deepak

    Hey Prashant,
    Was just thinking of another situation; Instead of a compulsory licensee, let’s assume we are discussing only a licensee or an exclusive licensee.

    Since my interpretation of Section 107A(b) construes even a licensee or exclusive licensee of the patentee as a person “duly authorized under Indian law to produce and sell/ distribute in India” the patented product, could I then argue that if the right to import has not been granted in the license given by the patentee, then Section 107A(b) permits the licensee/exclusive licensee to import it from his own unit outside India, without attracting claims of infringement of the patent? Let me know what you think.

    Bests,
    Sai.

    Reply
  12. AvatarAnonymous

    There is another point of view on the meaning and scope of section 107A(b).

    Post excerpt: “…Interpreting the meaning of “authorized under the law” to mean authorization under the patent law of the country from which the product is being imported would achieve the aforesaid balance. Under such an interpretation, a person will not be liable for patent infringement if he imports a patented product after purchasing the same from a person authorized under the patent law of another country. Such authorization may come from the patent holder or the patent office or government. If a patent or patent protection does not exist, there cannot be authorization and parallel import exhaustion will not apply…”

    complete post http://bit.ly/bi2SsW

    kindly let the readers know your opinion

    anonymous

    Reply
  13. AvatarSneha

    Sai,

    I dont think that the example of a compulsory license is a “wrong example”.

    I think that the presence of S.90(2) and (3) simply means that the compulsory licensee cannot himself import the patented product from his manufacturing unit abroad. Presence of S.90(2) and(3) does not preclude a third party from importing the patented product from the compulsory licencee’s manufacturing unit abroad. And it is this import by a third party that S.107A(b) aims to exempt from liability.

    Reply
  14. AvatarJ.Sai Deepak

    Dear Sir,
    I see your point; but I think the point where we depart is on the issue of multiple interpretations because not every interpretation is a plausible one.

    At this juncture, I should state that I did read your article to understand where you are coming from and while we are on the issue of opening up presumptions, there are a few conclusions in your article which I would like to open up here for discussion.

    If in the process, we end up concluding that international exhaustion is indeed the sole right conclusion, I don’t think I am dead set against it. After all, at the end of the day, I am a consumer too.

    Let’s start with internal page 79 of your article where you discuss “Indianising The Law”; you have stated as follows:

    “In other words, was one to interpret “law” as Indian law, one is faced with an absurd question: Under Indian law, can Beximco produce and distribute the drug in Bangladesh? Therefore, any reasonable construction of section 107A(b) would suggest that “law” as used in the section has to mean Bangladeshi law.”

    We are on the same page until the point where we agree that Indian law cannot authorize production and sale or distribution in Bangladesh. But from there on is where the departure begins.

    Since you interpret the law to mean “Bangladeshi law”, you have had to propose an alternative interpretation to the use of “patented product”. What I mean is, according to you, if “under the law” has to be imputed the meaning “under the Bangladeshi law” or “under the foreign law” , “patented product” has to be interpreted as “product patented in both countries” so as to ensure that India does not violate its obligations under TRIPS.

    Now the problem with interpreting “patented product” as a “product which is patented in both the exporting and importing countries” is that there already exists a definition for the “patented article” and “patented process”, both of which refer to product/process protected by a patent granted under the Indian Act.

    In addition to that, as was evidenced in Strix v. Maharaja, it is well-nigh plausible that two unrelated entities/individuals could hold patents in their respective jurisdictions on the same product/process.

    If this be the case, exhaustion of rights of the foreign patentee on first sale in such foreign country does not lead to international exhaustion because there is no exhaustion of the Indian patentee’s foreign patent rights.

    Therefore, what flows from the above is that, to support international exhaustion, which your article emphasizes is the underlying purpose of the provision, (1)we end up going against an express definition and (2)we have not factored the possibility of the patents over the invention being held by 2 different entities.

    Also, since both these points are to be considered as having been taken account of by the legislature when amending Section 107A(b), it appears to be a stretch of an argument when we contend that international exhaustion is the prevailing sentiment of the provision when neither of these points seem to have been accounted for.

    Continued

    Reply

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